There's a cheap, proven fix to the world's biggest problem

Story highlights

  • John D. Sutter visits Washington and British Columbia to learn why a carbon tax is the cheapest, smartest way to fight global warming. Why isn't it catching on?
  • Voters in Washington will decide this fall on a carbon tax that could have far-reaching implications, he writes


Seattle (CNN)Yoram Bauman learned about the idea that would change his life, and the course of the world, as a nerdy undergraduate at Reed College.

The economics professor's pitch was so simple he couldn't shake it.
We should make bad stuff more expensive.
    And, by doing that, make good stuff cheaper.
    "I remember thinking that it was such an intellectually beautiful idea," he told me.
    It is beautiful. And, as it turns out, this old theory, which dates back at least to the 1920s and an economist named Arthur Pigou, is essential to fixing one of the world's biggest problems.
    Bauman, who now is a PhD economist and stand-up comedian (more on that later; and, yes, he does jokes on the Laffer curve), is the force behind a proposal on the ballot this fall in Washington state that would turn this old, elegant concept into what could be the country's smartest climate change policy.
    It's thought to be the first time a proposal like this has gone before U.S. voters.
    Washington's Initiative-732 would make a bad thing -- pollution -- more expensive by putting a tax on each ton of carbon dioxide created by cars, power plants and the like.
    That's because Bauman's carbon-tax proposal aims to be "revenue neutral," meaning all of the money the state collects from the tax on carbon will be returned to the people and businesses as tax breaks. So this shouldn't be seen as an additional tax. It's a different tax -- a pollution tax.
    It helps account for the very real social costs of burning carbon.
    The fee is levied on each ton of CO2-equivalent gases that are emitted. So the tax would show up at the gas pump and also on electric bills for businesses and homes. To avoid the tax, businesses and people gradually would shift to cleaner-energy sources that don't pollute.
    Because of the accompanying tax breaks, many families would save money.
    The concept has broad support from intellectuals on the right and left. Economists, environmentalists, climate scientists -- even oil execs at Exxon Mobil -- back the theory.

    CarbonWA founder Yoram Bauman breaks down the logic of carbon taxes and WA's I732. #yeson732 #carbontax #putapriceonit

    A photo posted by Heidi Cody (@climatetoothpaste) on

    They prefer it to other methods of eliminating carbon emissions, which include passing strict environmental rules for industrial polluters or subsidizing renewable energy. The latter is seen as less economically efficient than a tax. Subsidies ask the government to pick technologies that are most deserving of support. Technologies are always evolving, though, and a carbon tax lets the market decide which climate solutions are best suited for the problem.
    The tax may seem like an economic wash -- taxes increases here, tax breaks there -- but it's not. Fossil fuels would get more expensive under the plan. While businesses and people, particularly those in poverty, will see tax breaks, there's no reason to assume they would spend those savings on high-polluting activities. Using cleaner energy gets cheaper by comparison.
    Plus, this isn't just theory. It's been proven to work.
    After meeting Bauman in Seattle, I drove three hours north to British Columbia, which implemented a similar carbon tax in 2008. The economy there has grown, clean-tech jobs are booming and pollution is way down.
    "The thing about a carbon tax is it's a pure price signal," Christy Clark, British Columbia's premier, told me on that visit.
    Nearly everyone who studies climate change agrees governments should put a price on carbon if we're going to meet the terms of the Paris Agreement. That treaty, which more than 100 countries, including the United States, are expected to sign at a U.N. ceremony on Earth Day, sets the goal of limiting warming to 2 degrees Celsius above pre-industrial levels.
    Basically, that means getting off fossil fuels this century.
    A price on pollution would help accomplish that.
    Yet the Washington initiative faces a steep uphill battle.
    Bauman has become a political pariah in the state. Some mainstream environmental groups, including one ironically named Climate Solutions, are opposing the plan. The state has raised questions about the initiative's claim of "revenue neutrality." And some labor unions and business groups are either ignoring or opposing this scary-smart concept.
    That's the paradox of the proposal in Washington and carbon taxes more broadly: Why is something so simple, cost-effective and smart seen as a political nonstarter?
    "That's the puzzle," Bauman told me. "How do you crack the code?"
    No one knows exactly.
    But Bauman is trying to figure it out -- by November.

    'I believe in the Laffer curve'

    I met Yoram Bauman and his team at a church in northeast Seattle.
    He founded a group called Carbon Washington to try to support I-732.
    Already the group had collected the 246,372 signatures needed to get this on the ballot. Now, it was time to figure out how to sell an unpopular tax to the public. They'd gathered about 45 volunteers in a church meeting room. Maybe half of them were wearing plaid.
    Bauman warmed up the audience with some jokes.
    "We have serious business to attend to, but I do appear before you this morning as the world's first and only stand-up economist," he said. "It's a niche market."
    Insert cymbal noise here.
    "I'll share with you the first joke I ever told on a comedy stage," he said, "which was that when I told my father I was going to be a stand-up economist he said, 'Yoram, you can't be a stand-up economist.' And I said, 'Why not?' And he said, 'Because there's no demand.' I said, 'Don't worry, dad. I'm a supply side economist. I just stand up and let the jokes trickle down.
    "I believe in the Laffer curve."
    I promise the bit lands funnier than it reads.
    Bauman, a 42-year-old who is a lankier and less showboat-y version of Steve Jobs, ended up becoming a "stand-up economist" after accidentally making a hit YouTube video as a graduate student. He has a doctorate from the University of Washington, and taught there, too, but he's always believed that smart ideas should spill out of the ivory tower and into real life.
    So he's started using comedy to try to help make that happen.
    "I always have a PhD in economics to fall back on," he told me.
    It didn't always come naturally. When he started calling himself a "stand up" economist, a comedy club owner teased him because he was shaking so much on stage that he had to sit on a stool. He couldn't stand. The younger of two brothers, Bauman grew up as the nerdy sibling, the one who liked debate and math. But his family taught him to fight hard what he believed in -- even if that felt against the grain. His father escaped Germany just before the Holocaust during World War II and went on to become an engineer. Bauman's mother, who suffered from mental illness and committed suicide when he was only 3, was a named plaintiff in a pioneering sex-discrimination lawsuit in San Francisco. She alleged she was discriminated against because she was pregnant.
    A day care in that city later was named after her, he said.
    This history makes Bauman the kind of person who "takes risks others wouldn't," said Laura Gee, Bauman's wife. That includes telling jokes about economics.
    And it certainly includes Initiative 732.

    The pitch for an unpopular, necessary tax

    "Our job is so simple!" Kyle Murphy, Carbon Washington's campaign co-director, told the church audience. "We just have to talk to people. We don't have to lie. We don't have to spin it.
    "We just have to tell people what it is."
    He was prepping the volunteers for their first mission as part of I-732: walking door to door in Seattle and talking with people about this smart but potentially off-putting idea.
    I'd wondered aloud whether calling this a "carbon tax" was a smart idea. Maybe it should be called a "carbon fee" -- or a "carbon credit," something without that dreaded t-word?
    That would be dishonest, Murphy told me.
    "This is a great policy, and we're not going to be afraid of it," he said.
    In the back of the room were the group's unapologetic materials: clipboards, maps, brochures calling for "fairer taxes" and "cleaner energy," and a rough door-knocking script.
    As the room let out, I asked a couple volunteers if I could follow them around the neighborhood. I lucked out and happened to meet Alex Lenferna, who may be the best possible person to sell this idea to a bunch of randoms. Lenferna has a charming South African accent. His family comes from Mauritius, an island in the Indian Ocean, parts of which is expected to flood as seas rise because of warmer temperatures and melting glaciers. He's studying to get a PhD in the ethics of climate change. And, get this, he used to be a climate skeptic.
    Like, an angry, proselytizing, conspiracy-theory-spouting climate skeptic.
    "I got to meet friends who are scientists," he said, "and they didn't really seem capable of creating something so elaborate -- and banding together to create this global conspiracy."
    Ultimately, the facts won him over.
    Mind, blown.
    Lenferna's campaign materials for I-732 were loaded up with facts as well. The law, in its second year, would add a $25 tax for each metric tonne of carbon pollution. (This isn't on the brochure, but that amounts to about 25-cents per gallon of gas at the pump). The proposal also would lower the state sales tax 1 percentage point, saving the average family about $200 per year. It would fund a "working families tax rebate" for 400,000 low-income families, giving them up to $1,500 per year, and countering the argument that this pollution tax would have a disproportionate burden on poor people, who tend to spend a greater chunk of their incomes on gasoline and energy bills. The tax, the papers note, also eliminates a tax on manufacturing, "keeping good jobs in Washington."
    Carbon Washington expects the tax to reduce carbon pollution about 2% per year.
    The tax jumps from $15 to $25 per tonne of pollution in the second year and then increases by 3.5% per year, plus inflation, to a maximum of $100 per tonne in 2016 dollars. The ramp-up is supposed to help accelerate the greening of the economy and the cleaning up of the atmosphere. Remember, scientists say we need to be off fossil fuels entirely this century. But no one thinks it's smart to make that leap immediately. Businesses need time to adapt, and a concrete schedule of tax changes helps them plan and budget accordingly.
    Lenferna knows the data.
    But as I followed him from door to door on a rare sunny day in Seattle, I noticed he took a simpler approach. He highlighted the moral imperative of doing something about climate change, an argument Pope Francis has been making recently, with much success.
    Doing nothing leaves an unthinkable burden -- possibly an unlivable planet -- for generations, the canvasser told me. And people most affected by warming now tend to be those, like Pacific islanders, who burn little of the fuels that cause global warming.
    At doorsteps, the 28-year-old kept descriptions of the tax short and sweet.
    "The idea is you tax the thing you don't want -- which is pollution -- and you reduce taxes on families," he told a man who answered the door at a house with Christmas lights on it.
    The man's response: "I agree with that."
    In all, Lenferna knocked on 19 doors and found six people home.
    One didn't want to talk to him at all.
    But everyone he spoke with said they would support the measure.

    British Columbia: Where the sky didn't fall

    I wondered if this sort of understanding and enthusiasm existed in places that already have a carbon tax. Would people turn against it over time? Or would they see some benefits?
    I drove across the U.S.-Canada border to British Columbia to find out.
    The far-western province's carbon tax went into effect in 2008. It started at $10 Canadian per tonne of CO2 and since has ramped up to $30 Canadian per tonne (US $23.35).
    It's revenue-neutral; so other taxes are reduced to counterbalance it.
    On paper, the tax has been resoundingly effective. Carbon emissions in British Columbia dropped 5% to 15% because of the tax. Fuel use, meanwhile, plunged 16% between 2008 and 2013, according to a research synthesis by the Pembina Institute. It went up 3% in the rest of Canada. The economy in British Columbia slightly outpaced the rest of Canada. According to the premier's office, clean energy jobs are up 12.5% in the same time frame.
    So the sky not fall.
    The economy is booming.
    But what does that feel like on the ground?
    Even with tax breaks elsewhere, drivers in British Columbia still pay about 7 cents Canadian per liter more for gas because of the tax. And I had to guess that would feel pretty bad, especially when you know gasoline is cheaper in neighboring Washington. (Gas in the greater Vancouver area is hit with additional taxes, including those to fund public transit. The price in Washington was $2.50 per gallon; the converted price across the border was about US $3.25 per gallon.)
    So my first stop in Canada was obvious: A gas station in Surrey, British Columbia.
    About a mile from the U.S. border.
    I was surprised to find people buying gas here at all.
    "I'm supportive of anything to do with looking after the climate," Jim Tait, 44, told me as he pumped $114.89 Canadian into an RV he'd rented for a weekend trip to the mountains. "If you're going to drive these," he said, looking up at the vehicle, "you've gotta pay for 'em."
    Marc Boyd, 51, was filling up a plastic gas canister for a lawnmower.
    "It should be more!" he said of the tax.
    "The less carbon the better for the planet."
    Boyd drives a Ford F-150 but told me he's selling it for an electric car in part because of the tax.
    He and others told me they only buy gas in Canada, not the United States, in part because they want to support the local economy but also because they support the carbon tax. To them, it makes sense that driving should be more expensive because it pollutes.
    I found that incredibly noble.
    Not everyone shares those views, of course. I met a flight attendant who lives 25 miles from the airport and can't take the bus because of her overnight shift. And I met a human resources worker, Karen Coulter, who complained about the lack of public transit in rural areas outside Vancouver. She told me she supports action on climate change but this feels unfair.
    "There's no bus here, so in order for me to get around I have to take a taxi or I have to drive my car," she told me while filling up a sedan. "And I can't afford a taxi. It's like you can't win."
    She does make fewer car trips because of the tax, she said.
    These attitudes mirror public opinion polls.
    When the provincial government implemented the carbon tax in 2008, it caused a political firestorm, with the political left saying the tax would be ineffective and hurt the poor; and the far right saying it would kill jobs.
    As of late 2012, support was up to 64%.
    No one's calling for the tax to be repealed.
    The question now is whether to boost it -- and by how much.
    British Columbia's premier, Christy Clark, told me the tax will stay put until at least 2018, and it's possible it will go up after that. The province can't go it alone on climate change.
    "We all share this air," she said. "These boundaries are immaterial."
    Neighboring jurisdictions, including Washington, she said, need to step up.
    "If we can get off fossil fuels," she told me, "our children's future will be assured."

    The beauty queen with a plan

    Yoram Bauman and the folks at Carbon Washington, of course, would love for that to happen.
    But to succeed, they may need a lesson or two from Carole Taylor.
    Taylor is a Canadian political powerhouse -- and former newscaster and beauty queen -- who helped push British Columbia's carbon tax through the government system.
    "My task was to get people to accept the tax," she told me.
    I sat down with her to learn how she did it.
    The carbon tax in British Columbia didn't go up for a vote like the one in Washington state will. Instead, according to Taylor, who was the province's finance minister at the time, the policy was negotiated as part of British Columbia's budget and then approved by lawmakers.
    The move was controversial. The center-right administration was attacked by business groups and environmentalists, who started an "Axe the Tax" campaign.
    But the premier, Gordon Campbell, decided that cutting carbon emissions -- and greening the economy -- was going to be the signature issue of his administration.
    Taylor was determined to get the market to do the heavy lifting.
    She decided this was a Nixon-in-China sort of moment.
    "The counterintuitive thing is the one that will work," she said.
    The simple solution was best.
    And the hook ended up being tax cuts.
    "I believe, even today, that it was the only model we could have gotten passed," she said.
    From her career as a journalist, she knew people would be skeptical of the tax breaks -- and whether the government would actually stay true to its promises on that front. To assuage those fears, and to make sure low-income people weren't hit with higher energy bills, the provincial government cut $100 checks to all residents in 2008. These Climate Action Dividends were mocked in the press, but they also made the design of the policy clear: The point was to tax and eliminate carbon pollution -- and give the money back to the public.
    The party took an immediate political hit, but it helped them in the long run, Taylor told me. The next election essentially was won on the record of the then-popular carbon tax.
    "You have to be willing to be quite strong about it," she said.
    Many municipalities, universities and businesses see benefits.
    More than 130 businesses recently sent a letter to the premier asking for a higher tax.
    Sadhu Johnston, the city manager of Vancouver, agrees with them. In an office overlooking the city's stunning bay and snowy mountains, he told me modern workers are looking for a place to live that's like this city: energy-efficient, clean and with ample outdoor recreation. Vancouver has the lowest per capita carbon footprint of any city in North America, in part because the province is blessed with ample hydroelectric power. Its population has grown 30% since 1990, he told me, and total greenhouse gas emissions, meanwhile, have dropped 7%.
    "People like coming to communities where you can walk and bike places -- communities where you don't spend your entire day in the car," he told me. "It's a false dichotomy to say it's the economy or the environment, and Vancouver demonstrates that."
    To keep it up, the carbon tax needs to keep increasing, he said. And he also wants to see carbon revenues go to public transportation and other projects instead of tax breaks.
    Taylor, the former finance minister, told me that debate is healthy.
    But the most important thing is that the carbon tax exists.
    "I was driven by how can you get this in," she told me.
    "You can play with the models later."

    What would Washington look like?

    In the United States, conventional wisdom says a carbon tax can't pass.
    That may be true in Congress, where many Republicans, including Jim Inhofe, chair of the U.S. Senate Environment and Public Works Committee, continue to deny the reality of climate science, which is well-established and shows humans are causing dangerous warming. (At least 97% of climate scientists agree on this point.)
    But it's not true for the public.
    A 2014 survey shows 56% of Americans -- a narrow majority -- would support a carbon tax if the revenues were returned back to the public in the form of checks. Support for the tax actually went up -- to 60% -- if the tax collections instead funded renewable energy projects.
    So Washington's approach, while imperfect, may be the kind of thing that could work.
    And it couldn't come at a better time.
    From Donald Trump to Bernie Sanders, this is the year of the outsider in American politics.
    And Yoram Bauman is the definition of a political underdog -- a lovably awkward and earnest "stand-up economist" who knows of a big, smart, simple idea that could fix a major problem.
    He's good at weathering criticism. Comedy's taught him that.
    And he's steadfast in his belief that this is the right policy for the future.
    That's especially true since the birth of his daughter, now 20 months old.
    "This is the right thing to do, so he's doing it," his wife, Laura Gee, told me. "He's not worried about what other people think ... He's one of a kind ... He's a man in his early 40s who has the enthusiasm and idealism and energy of a person in their early 20s."
    The signing of the Paris Agreement on climate change also gives major momentum to this issue. People finally are starting to wake up to the moral urgency of doing something about pollution.
    The public would support a carbon tax.
    They just have to hear about it first.
    The political establishment -- including environmental groups like Climate Solutions -- is standing in the way. They're mired in policy wrinkles that can, as in Canada, be smoothed out later.
    This tax is "not enough to drive the transition alone," said Vlad Gutman, Washington director for Climate Solutions, an advocacy group based in the Northwest. "We need more than a price."
    The organization, Gutman told me in an interview in his high-rise office in Seattle, supports a price on carbon. But it wants revenue from a carbon tax to go toward clean energy subsidies and investment in public transportation -- instead of going back to people as tax cuts.
    Those goals are laudable, and they may be popular with some voters. They're unlikely, however, to get support from businesses and industry.
    The state, meanwhile, has raised concerns about I-732's revenue neutrality, with reports saying the proposal would cost the state more than $900 million over four years. Carbon Washington disputes the math, saying the state doesn't account for taxes on exported power and spot market purchases of electricity -- and overcounts expenditures on low-income tax credits.
    "These three issues together essentially fill the $900 million revenue gap," Bauman wrote in an op-ed in The Olympian. "We've identified other issues as well, but the bottom line is that the analysis is flawed and should be corrected."
    Climate economics experts told me it's always difficult to estimate tax revenue. The state's report has no bearing on whether the tax would work or not -- it will. And the discrepancy, they told me, is not a red flag.
    "This is an example of what a carbon tax ought to look like," said Shi-Ling Hsu, associate dean for environmental programs at Florida State University's law school and author of "The Case for a Carbon Tax."
    "It's a well designed policy," said Adele Morris, senior fellow and the policy director for the Climate and Energy Economics Project at the Brookings Institution. "It makes a lot of sense for Washington -- and I hope voters give it a chance."
    "What to do with the money is an important political question, and using the money wisely can do a lot of additional good," said Gernot Wagner, a researcher at Harvard's School of Engineering and Applied Sciences and co-author of "Climate Shock." "But it's the initial incentive that matters the most."
    Carbon Washington's proposal is a brilliant first step.
    As in Canada, it can be amended and debated later, experts told me.
    It also has opened a much-needed conversation about the cost of carbon pollution.
    Carbon pricing systems, including taxes and cap-and-trade measures, which work similarly, have been adopted or planned in 40 countries and more than 20 cities, according to the World Bank. China, the favorite scapegoat of U.S. politicians, and the world's biggest annual emitter of greenhouse gases, has pilot carbon markets in seven cities and regions already; and the massive country has announced a national carbon trading market for 2017. There's ample reason to hope China, which invested $102.9 billion in renewable energy in 2015, more than any other country, will follow through on this pledge.
    Momentum is building, as is the understanding that pricing pollution is not just helpful but is truly essential if we're going to stop warming short of 2 degrees Celsius.
    If Washington passes a carbon tax, there's reason to believe other states will follow, and that places like British Columbia will be able to keep raising their tax to phase out pollution entirely.
    If that momentum grew into a national carbon tax for the United States the results could be striking. According to a report from the Citizens' Climate Lobby, a group supportive of these types of policies, a carbon fee starting at $10 per ton and increasing by $10 per year would reduce U.S. CO2 pollution to 50% below 1990 levels within 20 years, which is huge.
    Improved air quality would prevent 230,000 premature deaths over 20 years.
    We have to stop thinking of these taxes as negative.
    They are market tools to kickstart a cleaner, healthier and still-thriving economy.
    The transition won't be painless. Coal and other dirty fuels will be phased out over time, and there should be government programs to support and retrain those workers.
    But it is necessary.
    And it's far less scary than demagogues would have you believe.
    As I left Bauman at his car in Seattle, I asked him whether he thinks the state will look or feel that different if the tax passes and I come back to visit in 10 or 20 years.
    He thought about it for a minute.
    Not that much, he said.
    "You'd see more of this car," he said, pointing to his vehicle, which is a tiny Honda Fit, "and less of that car," he said, pointing to a much larger silver SUV.
    The shift is subtle but real.
    And it has to start somewhere.