Environmental Tax Reform

Simplicity is a tough sell in Washington. Special interests thrive on carving out sweetheart deals and exemptions from complex and indecipherable policies and regulations. In energy and climate policy, the story is no different. The market economy struggles to operate on the slanted and muddied playing field built by status quo politics.

In republicEn, we think its worth the fight against entrenched interests and big-government inertia to build an accountable, free enterprise system in the energy sector. Without environmental tax reform, our companies and innovators will continue to compete for political patronage — both in the form of subsidies and free passes to pollute without fee or consequence. Americans are better served when companies compete for consumers, not handouts. That’s what environmental tax reform achieves.

With a few common sense steps, environmental tax reform could quicken economic growth, cut pollution, preserve American competitiveness, and clean up Washington energy politics.

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Special interests and government bureaucracies have assembled a vast collection of overlapping programs, subsidies, and mandates, all intended to rig the energy market in one way and the other. New interventions are often designed to offset the market-distorting effect of some other intervention — in other words, ‘let’s give oil, gas, coal, solar and wind all subsidies!’ And government interventions to ‘green’ the energy sector ineffectually attempt to offset the biggest subsidy that government gives the energy industry: the unlimited right to freely emit greenhouse gas pollution. The status quo is growing government, distorting the market, failing to adequately address environmental risks, and diminishing the ability of the energy industry to make informed investment decisions.

The status quo is expensive and ineffective. Forthcoming EPA climate regulations cover just one third of domestic greenhouse gas emissions, but are already projected to cost taxpayers over $140 billion by 2025. It’s poor climate policy because it covers a fraction of emissions and includes no possible recourse to level the playing field with China and other big emitters. It’s also the worst kind of tax because it raises no revenue; all that $140 billion just evaporates from the economy.

The status quo also has de-facto taxes which don’t just evaporate…they’re redistributed to special interests. The government pours money into the energy industry via 26 discrete energy-specific tax breaks, which cost taxpayers more than $19 billion in 2012.

Environmental tax reform is the free-market option to replace the status quo of subsidies and climate regulations. It would encourage economic growth by reducing taxes on income and work and simultaneously help us reduce carbon pollution faster than the myriad regulations from the EPA.

Free enterprise can’t function with the government’s big thumb on the scale, and consumers can’t chose an energy future without knowing the true costs of the energy they’re buying. We can fix that with environmental tax reform.

And if Americans can pull this off, we can finally put to rest the tired old narrative that environmental responsibility requires big government.