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Can a tax help cut down greenhouse gas pollution?

April 21, 2016 at 6:25 PM EST
Is making pollution expensive the best way to combat climate change? Economist Yoram Bauman thinks so -- he’s spearheading a campaign for a carbon tax in Seattle. But the proposal is raising opposition, and has brought together some unlikely bedfellows on both sides of the debate. Economics correspondent Paul Solman reports.
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HARI SREENIVASAN: Global leaders will gather at the U.N. tomorrow to sign a landmark agreement aimed at limiting climate change, and it’s happening, not coincidentally, on Earth Day.

But many observers say those actions will not be enough. In Washington state, there’s a battle over taking a big step and whether to approve the first tax on carbon in the U.S.

“NewsHour” economics correspondent Paul Solman has the story, part of his weekly reporting, Making Sense, which airs every Thursday.

YORAM BAUMAN, Economist: You might be an economist if you don’t read human interest stories because they don’t interest you.

(LAUGHTER)

PAUL SOLMAN: At Seattle’s museum of flight a couple weeks ago, the annual Climate Night event, headlining, Yoram Bauman, the world’s first and only stand-up economist.

YORAM BAUMAN: You might be an economist if you have ever gone into a bank or other financial institution in the hopes of getting a date.

(LAUGHTER)

YORAM BAUMAN: If you adamantly refuse to sell your children because you think they will be worth more later.

PAUL SOLMAN: But these days, Bauman’s leading a dead serious fight, to combat climate change in his home state of Washington, by using a basic principle of economics.

YORAM BAUMAN: Which is that the way to get less pollution is to make polluting expensive, because, if you make pollution expensive, you get market forces working to promote conservation, innovation, development of new technologies, all the things that I as an economist love about capitalism.

PAUL SOLMAN: And the way to make carbon-based greenhouse gas pollution more expensive, says Bauman, is to tax it. So, he founded a grassroots group, Carbon Washington, to put the issue to voters.

MAN: Initiative 732, it’s going to be on the November ballot.

MAN: I-732 works by charging polluters with a carbon fee, which lowers pollution.

WOMAN: And then the revenue that is created will go to reducing other taxes in the state.

PAUL SOLMAN: Making the carbon tax, starting at $25 per ton of CO2, about 25 cents per gallon of gasoline, revenue-neutral.

YORAM BAUMAN: The revenue from the carbon tax goes to cut existing taxes. Most of it goes to cut the state sales tax by a full percentage point. Most households are going to pay a few hundred dollars a year more for fossil fuels and a few hundred dollars a year less for everything else.

PAUL SOLMAN: Everyone will pay the carbon tax, says Bauman; everyone gets the sales tax cut. But two groups get a bonus.

YORAM BAUMAN: One of those groups is manufacturers who are competing with businesses outside of the state.

PAUL SOLMAN: They will get the state business tax eliminated. And low income households, who might be especially hurt by higher gas taxes, will get a tax rebate.

YORAM BAUMAN: It’s going to provide up to $1,500 a year for 400,000 working families in Washington state. And that is how we are going to do our part to save the world.

PAUL SOLMAN: So, is a revenue-neutral carbon tax how the world will eventually cope with climate change via economics? Or is it just another tree-hugger’s quixotic quest?

Well, in Washington, the fight has produced some odd alliances, although there’s nothing surprising about business’ opposition.

Ian Tolleson is a lobbyist for food processors in the Pacific Northwest.

IAN TOLLESON, Northwest Food Processors Association: We heat things, we cut things, we wash, and this is all for food safety. And that requires a lot of energy, tax, tax, tax all through the supply chain. And what that does, our products are now more expensive on the shelf. And how can we compete with those producers that wouldn’t have this tax?

PAUL SOLMAN: We met up with Tolleson at Seattle’s Pike Place Market, which features, among other attractions, the world’s presumably first and only Hula-Hoop, guitar-on-chin-balancing troubadour.

But isn’t Tolleson at all worried about global warming?

I am sitting here sweating in Seattle in April. I’m not saying that proves climate change, but it certainly suggests that something is going on.

IAN TOLLESON: I won’t disagree with you that climate is changing, but this is a global phenomenon, and it needs a global solution. Is it fair to put that on the back of Washington employers and families?

PAUL SOLMAN: Moreover, says Tolleson:

IAN TOLLESON: We already have the fourth cleanest economy in the whole United States.

PAUL SOLMAN: Case in point, the harvester just around the corner.

EMILY CRAWFORD, Pike Place Market: It turns food waste into organic liquid fertilizer.

PAUL SOLMAN: Pike Place’s Emily Crawford.

EMILY CRAWFORD: We have 20 different vendors putting their food scraps into the harvester, which can process more than 4,000 pounds of food scraps every day, which the EPA has shown is one of the biggest causes for carbon emissions in the United States, is food waste.

PAUL SOLMAN: Siding against the carbon tax and with big business, its usual adversary, the unions, though State Labor Council president Jeff Johnson says he too is an ardent environmentalist.

JEFF JOHNSON, President, Washington State Labor Council: During the winter, we have been struck with repeated floods and mudslides. In the summer, we have droughts and forest fires. Our shellfish industry has left the state and gone to Hawaii because the acid levels in the ocean has risen so much.

PAUL SOLMAN: But doesn’t that mean that you should embrace anything that would help climate change and counteract it?

JEFF JOHNSON: No, it doesn’t, particularly if you embrace a measure that’s actually going to send us down the wrong path. We have got an energy-intensive company, Kaiser Aluminum out in Spokane, eastern side of our state. It’s the most efficient aluminum rolling mill in the world, right?

With just a carbon price, they become less competitive with aluminum makers in other parts of the states, in other parts of the world.

PAUL SOLMAN: And that’s the key issue for a labor leader, right? You’re always trying to protect jobs?

JEFF JOHNSON: I’m trying to protect jobs of the individuals, but also the revenues of the community in Spokane, and we’re trying to keep the most, the world’s most efficient aluminum producer in our state, rather than them moving or shutting down.

PAUL SOLMAN: What does that shirt say?

JILL MANGALIMAN, Executive Director, Got Green: Oh, yes, this is where — we’re Got Green. We are a community-based organization in South Seattle led by people of color.

PAUL SOLMAN: Business and labor are strange enough bedfellows. But why is environmental organizer Jill Mangaliman opposing the carbon tax?

JILL MANGALIMAN: This is a great opportunity for us to actually put something back into the communities who are — who have been struggling for so long, historically. Without any kind of targeted revenue, business can continue as usual, and that’s not what we want.

PAUL SOLMAN: Instead of revenue-neutral, Mangaliman wants revenue-targeted to groups like Got Green and the economically stressed constituents they serve. So, a curious coalition is con.

But look who’s popping up pro.

You’re a conservative policy guy. How come you’re in favor of a carbon tax?

TODD MYERS, Environmental Director, Washington Policy Center: Anything that moves environmental policy away from regulation, which is very high-cost and ineffective, toward a personal incentive, which is more effective, is a good thing.

PAUL SOLMAN: Todd Myers, a right-winger, pushing the revenue-neutral carbon initiative.

TODD MYERS: It provides an incentive to be more efficient, to have less impact on the environment, but, at the same time, doesn’t increase taxes, doesn’t waste money on regulation, doesn’t harm the environment.

PAUL SOLMAN: By contrast, fellow supporter Jason Puracal is a man of the left.

What was it like to spend two years in prison in Nicaragua?

JASON PURACAL, Carbon Washington: Well, it was horrific conditions. That’s for sure.

PAUL SOLMAN: Now safe in Seattle with his family, Puracal is an environmental activist, imprisoned in Nicaragua in 2010 on trumped-up charges, later dropped.

JASON PURACAL: My family had to launch an international campaign to save my life, and ultimately succeeded with the support of thousands of people from around the world. That case basically inspired, how do we do change at a greater level, at a policy level?

PAUL SOLMAN: You mean that your wrongful imprisonment in Nicaragua has impelled you to join this revenue-neutral carbon tax initiative?

JASON PURACAL: Yes. It’s great to put a price on carbon and try to move us away from fossil fuels, but how do we do so in a way that’s equitable for all?

PAUL SOLMAN: So, the lower sales tax will offset higher gas costs, with an annual rebate further softening the blow for low-income families.

But if people stop using carbon, take a drastic change…

JASON PURACAL: Which is the intention, right?

PAUL SOLMAN: … then there will be less revenue.

JASON PURACAL: At some point in the future, yes, there will have to be some renegotiations on where that revenue comes from, if we are able to transition off of fossil fuels altogether, which would be a great problem to have.

PAUL SOLMAN: For the moment, though, Seattle is experiencing midsummer days in early spring. The fish are jumping. Some locals are high. And the carbon tax is polling 44 percent for, 46 percent against with seven months to go.

For the “PBS NewsHour,” this is economics correspondent Paul Solman, reporting from balmy Seattle.

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