The conservative American Enterprise Institute released an energy policy proposal on Wednesday that included support for a carbon tax and higher levels of energy innovation funding.
The proposal, co-written by AEI’s Steven Hayward, Brookings’ Mark Muro and the Breakthrough Institute’s Ted Nordhaus and Michael Shellenberger calls for federal investment of $25 billion per year towards R&D and a network of university-private sector innovation. The investment would be paid for by a $5 per ton carbon tax.
Perhaps the most striking thing is that a conservative think-tank has signed on to a proposal that includes an increase in taxes. “That’s the thing I’m least enthusiastic about… [but] any new spending program has to be paid for by a revenue source. These are deficit conscious times,” explains Hayward to FrumForum. “If it’s not a carbon tax, then it has to be cutting subsidies, or higher oil and gas royalties.”
The authors argue in their paper that the $25 billion per year federal investment is necessary because private industry is dedicating too little money to research and development. The energy sector only devotes 0.3% of domestic sales to R&D, compared to industries driven by innovation, such as communications (25.6%), software (15.1%) and pharmaceuticals (11.9%).
Hayward told FrumForum that although market-oriented individuals may shudder at the thought of this type of federal intervention, the energy market isn’t currently free. “The oil market is dominated globally by state-owned oil companies, which means that the marketplace is vulnerable to political manipulation… because it’s not a perfectly free market, I think it’s not sufficient to say ‘oh, just let the market take care of it’ and do nothing,” says Hayward.
From a political standpoint, Hayward understands that there is a lot of work to be done before this initiative can be legislatively realized. “It’s a hard sell. I think it’s an impossible sell, at least right now,” said Hayward. “The next six months or more are going to be about deficit reduction, limited government and fighting over taxes – so this issue will remain on the back-burner. But if we have another election with $4 or $5 gasoline, you’ll see that change in a hurry.”
The policy paper is labeled as ‘post-partisan’, but Hayward admits that many Republicans still don’t view climate change as being man-made, or a problem worth addressing. However, there are other reasons to support his proposals, he argues:
A lot of Republicans, even those who don’t believe in climate change at all, understand that we’re vulnerable to $4 a gallon gasoline, like we had a couple years ago… and we don’t like the instability that comes from dependence on foreign oil.
The policy paper is the product of a long effort that started when Hayward first read a book written by his co-authors, Ted Nordhaus and Michael Shellenberger, Break Through: From the Death of Environmentalism to the Politics of Possibility. “Their perception of the climate problem was so fresh; lefties who are thinking outside the environmental box,” recalls Hayward, that he went to them and said, “You’re like Gorbachev, you’re someone I can do business with.”
Hayward also offered a look into the political side of the think-tank world. Although the paper was finished in Spring of 2010, the authors agreed not to release it until now in order for it not to be seen as a missive against cap-and-trade.
“We decided not to roll it out during the summer when the cap-and-trade bill was still alive,” says Hayward. If they had, he explains, environmentalists would have accused the authors of bad faith – the paper criticizes cap-and-trade – and not taken the policy paper seriously.
Trans-ideological proposals on energy policy are possible, say the authors. If Americans want to fight the challenges of climate change and reduce their dependence on foreign oil, this piece sets a good baseline for discussion.
Add Tim on twitter: www.twitter.com/timkmak