Washington D.C.’s government is currently discussing the viability of a local tax on greenhouse gas emissions—in common parlance, a carbon tax—to address climate change.
A carbon tax would place a price on the emission of greenhouse gases, thereby nudging energy users to sources with lower carbon profiles. Although there is no bill pending at this time, District Councilmember Mary Cheh, head of the Committee on Transportation and Environment, has lent support to the idea and has cited the “Put a Price On It, D.C.” campaign as the impetus for the current round of discussions.
“Put a Price On It, D.C.” claims its proposal would reduce carbon emissions by at least 23 percent by 2032, helping the District reach its goal of reducing carbon pollution by 50 percent by that same year, as well as grow the local economy. But for all its rhetoric, the campaign neglects some of the most fundamental questions in both climate and economic policy.
The first glaring shortcoming is that this proposal would do nothing to halt rising temperatures. Climate change is a global phenomenon. D.C. contributes less than one one-hundredth of one percent of global carbon dioxide emissions. Considering that China and India will continue to increase their emissions as their domestic consumption grows and more rural communities come onto the electricity grid (as they should), one need not have expertise in atmospheric science to see that a local carbon tax to reduce D.C.’s already paltry sum has no meaningful effect, even if combined with similar efforts in multiple major American cities.
To complicate matters, it is not clear to what extent the District of Columbia (or the United States as a whole, for that matter) will experience economic losses as a result of emissions-induced warming. If we’re “putting a price on” emissions, we need economic projections that rely not just on climate models, but also on the selected assumptions of economic modelers. To the chagrin of those who proclaim consensus, tinkering with seemingly small variables such as the discount rate can drastically alter the cost a model assesses. For example, one of the models used by the Obama administration in its policy planning, for example, yields a negative cost of carbon emissions when a 7 percent discount rate is used, implying that carbon emissions actually confer a benefit.
Despite that murkiness, what is abundantly clear is that local policies lack the gravity needed to make any difference either way. The “Put a Price On It, D.C.” plan is not climate action—it is climate theater.
And as any theatergoer knows, seats come at a cost. The cost to the District of Columbia would be a loss of competitiveness. By intentionally driving up the price of energy (the whole point of a carbon tax), this proposal would make D.C. a less attractive place to live and do business. With suburban economic centers in Maryland and Virginia positioned just a few steps beyond the confines of the District, the city is highly susceptible to industry and capital flight as a result of a carbon tax.
In fact, this is a common dynamic that has been dubbed “carbon leakage.” Just as residents of British Columbia fill up their tanks across the border in Washington state to flee North America’s highest gasoline prices, a D.C. carbon tax would compel erstwhile contributors to the city’s economy to take their money to Maryland and Virginia. To add insult to injury, the inevitable “carbon leakage” would undermine the veracity of claimed emissions reductions by simply shifting emissions to other nearby locales.
The proposal offered by “Put a Price On It, D.C.” would do virtually nothing in the service of climate change mitigation. But it would weaken the local business environment.
Should any carbon tax bill reach the D.C. Council, members ought reject it in favor of preserving the District’s competitiveness.
Jordan McGillis is a policy analyst at the Institute for Energy Research, a free-market energy policy think tank based in Washington.
