This is How you Pay for the Green New Deal
To tackle climate change we must make it more expensive to invest and profit from fossil fuel
We Need a Carbon Capital Gains Tax
Most people don’t care how their lights turn on, only that they do. Most people don’t care how they power their car, only that it gets them from their job to their child’s school. Citizens and consumers do not demand coal or natural gas — they need heating and a way to keep their lights on. Global climate change is regularly framed as a failure of market demand. But market demand implies consumer preference, which itself implies consumer choice. How many utility companies offer alternatives? How many cuts has public transportation endured in the last half century? How many electric cars are within lower price ranges?
Critics that claim renewable energies are not ‘cost-competitive’ with fossil fuels fail to acknowledge that this is by design.
Climate change is a failure of supply. Captured governments and the fossil fuel industry that control them have determined what form the energy supply takes. The fossil fuel industry employs an army of lobbyists, accountants and lawyers to extract hidden subsidies, lower royalties on public lands, gut safety regulations and regulatory agencies, win local tax incentives, and lower tax bills through depreciation of physical assets, global transfer pricing and low capital gains taxes. These actions conspire to hoard public capital, rig energy and transportation choices, and incentivize repeat investment into the fossil fuel industry. In other words, the fossil fuel industry has rigged the energy supply and made sure that its products are the only choice. They have manufactured the demand to their sole product and repackaged the narrative as a price-driven ‘addiction to oil.’
Because the fossil fuel industry has ensured an absolute monopoly, owners and shareholders of capital continue to profit wildly from fossil fuel investments. While universities launch climate change research programs, their tax exempt endowments are funding offshore drilling operations. While the tax exempt philanthropic endeavors of the global elite fund biodiversity research, their personal investments fund shale plays throughout the United States. Meanwhile climate change is increasing the costs of home insurance, forcing people to evacuate ancestral homes, and raising the costs of most consumer goods. These investors want to privatize gains and socialize losses.
Bubbles and Stranded Assets
In 2015, the Obama-Biden administration overturned a 40-year ban on crude oil exports. In response, Wall Street showered a tremendous amount of capital onto the American shale industry. On January 4, 2016, ConocoPhillips — 1 of 16 companies that collaborated to overturn the ban — became the first to export American crude oil, sending a shipment from the Texas Gulf Coast to a trading hub in southern France. In 2018, the U.S. shattered records by exporting 3 million barrels of crude oil a day. Combined with a boom in U.S. oil and natural gas production, the U.S. is a net energy exporter in 2020. Some forecasts project that by 2024, the United States will export more oil than Russia and will close in on Saudi Arabia. This means that domestic demand is not driving domestic fossil fuel supply.
Because global financial markets continue to reward fossil fuel investments, we must create a market penalty. Any action to address global climate change must first begin with a global carbon capital gains tax. This proposal may sound familiar if you’ve ever heard of a carbon tax, but the two proposals couldn’t be more different. A carbon tax requires regular people to bail out fossil fuel and finance industries for the damages they have caused to our planet. A carbon capital gains tax requires the fossil fuel industry and profiters to pay. A global carbon capital gains tax will shift capital towards renewable energy. It will make revenue available to governments to fund modern transit and infrastructure build-ups. And it will finally make the people directly responsible for increased fossil fuel use divest and unleash needed capital on creating a green new deal for all.
Divest from the few, Invest in the many
From the inception of the American income tax, capital gains have been taxed at lower rates than ordinary income. Proponents of low capital gains taxes argue that this is an incentive to make capital available to industry, so that industry invests in new projects or new products. Indeed, the market capitalization of the top mineral and oil and gas firms on the Nasdaq Stock Exchange is $2.7 trillion dollars (as compared to $333.5 billion investment in clean energy in 2017). This is a tremendous amount of capital devoted to business-as-usual fossil fuel projects all over our warming world. This is our intervention point. We want to stop people from profiting from the apocalypse.
The United States must lead the effort to establish a uniform global carbon capital gains tax on short-term and long-term gains from stocks and futures, dividends, royalties, royalty trusts, academic and institutional endowments (even the tax-exempt ones) and assets for fossil fuel activities. There should be no way to offset (depreciation or otherwise) these gains. We should hunt for and weed out any loopholes. It is clear that even with the prospect of profound human suffering, voluntary divestment is not happening at the necessary rate. We know that just 100 companies have been the source of more than 70% of the world’s greenhouse gas emissions since 1998. Thankfully, this makes global governments’ task all the simpler, as we largely know which firms and what activities we need to target for a carbon capital gains tax.
Targeted carbon capital gains taxes will shift investment away from fossil fuel projects and towards renewable energy opportunities. Many major fossil fuel companies have already begun slowly investing in wind and solar power as well as battery technologies. A carbon capital gains tax simply accelerates these renewable investment trends. Additionally, it will mitigate the global financial risks of asset stranding from continued investment into large fossil fuel projects. A worldwide agreement on corporate tax rates and a global carbon capital gains tax rate on fossil fuel firms would ensure that local governments have the revenue necessary to transform public transportation, reinforce sea defenses, and invest in new electrical grids. The rich of the world are already preparing for a climate change doomsday. It is time they join the rest of the world in stopping it.
Just Transition
A global-wide carbon capital gains tax is just the beginning. Governments around the world must repeal the $5.2 trillion in annual subsidies that entrench fossil fuels interests and undermine their own national interests. While the fossil fuel industry abandons its workers by automating hundreds of thousands of jobs worldwide (while still managing to enrich shareholders), world governments must commit to a just transition for the workers left behind. Whether its guaranteed employment cleaning up the millions of abandoned oil and gas wells or direct training and financial support, governments must include workers in the transition. The architects behind the Green New Deal Referendum recognized that a massive divestment from oil and gas, investment in renewable energy and public infrastructure, and a new commitment to a good life for all Americans are part of the same vision and political struggle. For instance, the American Society of Civil Engineers report card does not rate a single piece of American public infrastructure (roads, levees, drinking water, etc.) above a D-. America is due for a massive build-up and that requires both jobs and capital. We will stitch together a coalition of supporters who recognize that the carbon capital gains tax can both help avert global catastrophe and fund an American renaissance.
Human beings have always needed energy to cook food and make work more efficient. Fossil fuels allowed humanity to create and travel at breathtaking speeds and it functioned as the very foundation on which we have created a global society. But it is clear that these gains were not without cost. We are at the dawn of an energy and societal transition. We have the people, the tech, and the will to build this new economy — all we need is the capital.
