Taking the Wrong Lessons from the Gipper on Climate

I love George Shultz, Ronald Reagan’s secretary of state and one of the heroes of the endgame of the Cold War. He began every meeting with a Soviet official with a specific human rights complaint about a dissident the Soviets had locked up, just to get under their skin and keep the pressure on.  He was magnificent in his meetings with the Soviets after the shootdown of KAL 007, and in his one-on-one’s with Gorbachev in the Kremlin. He was the ideal complement to and instrument for Reagan’s Cold War grand strategy. His memoir of those years, Turmoil and Triumph, is well worth reading.

So it is a regrettable duty to disagree with his Washington Post article Friday entitled “A Reagan Approach to Climate Change,” in which Shultz argues that Reagan would have embraced a revenue-neutral carbon tax “as an insurance policy” against climate change because Reagan embraced the Montreal Protocol that eliminated chloro-flourocarbons (CFCs) in order to reduce damage to the stratospheric ozone layer.

Leave aside the carbon tax argument for a moment. One of the greatest mistakes of the climate change enterprise was adopting the Montreal Protocol as a diplomatic and policy model for greenhouse gases, and Shultz perpetuates this mistake, even as some of the smarter environmentalists (yes, there are a few) have come to understand this mistake. First, the scientific evidence and future projections about ozone degradation were much simpler and straightforward than global warming. More importantly, there were ready substitutes for CFCs that were more affordable and—crucially—scalable to the whole planet quickly. Neither of these things are true with regard to replacements for fossil fuel energy. (The second mistake of copying the Montreal Protocol framework for the Kyoto track was dividing nations into developed and “undeveloped”—a distinction that was falling apart by the late 1990s—and treating them differently for GHG reduction purposes. But that’s a story for another time.)

In his piece, Shultz implicitly acknowledges that the circumstances with GHGs are different than CFCs by including a call for much more government investment in R & D for energy (we didn’t need to do any R & D to replace CFCs in the late 1980s—the substitutes already existed), and for calling for a sharply rising carbon tax to be “revenue neutral” and rebated to consumers. Why the need to rebate a tax to consumers if carbon emissions are falling? Because he knows there is no way carbon emissions will fall fast enough for the tax to be an insignificant expense. He thinks a high carbon tax will “level the playing field” with alternative sources of energy. This is very dubious. Just have a look at Europe, where very high taxes on fossil fuels (purely for revenue reasons) have been the rule for decades. Has Europe seen a proliferation of alternative energy? (And if anyone says “Germany,” you’ll get an “F” in my energy policy class.)

I once heard Shultz tell the story that when oil prices fell sharply in the mid-1980s, and hence gasoline prices went down to something like 79 cents a gallon, he proposed to Reagan that it was a perfect time to embrace a 50-cent-a-gallon gas tax that would promote conservation and reduce the federal budget deficit. Reagan, he recalled, smiled in a way that made clear to Shultz that Reagan wasn’t about to consider the idea for a second. And neither would Reagan come anywhere near a carbon tax. I’m wondering if Shultz’s pal Tom Steyer wrote this article for him?