Why Americans Want a Carbon Tax, But Won’t Support One at the Polls

An economist looks at how economic worries, and political ideology, have made carbon taxes a tough sell.

Economists generally agree that the most efficient way to reduce carbon dioxide emissions that cause global warming is by putting a price on carbon in the form of a carbon tax. Consumers, though, can tend see things differently. The idea of taxing the fuels that run our cars, and power our homes and jobs, has given Americans pause and, as a result, no carbon tax has been levied to date in the United States.

Nevertheless, calls for a carbon tax have become more frequent as concern over climate change has intensified. On Capitol Hill, there are half a dozen carbon fee proposals in circulation, with backing from liberals and conservatives. States have also explored carbon pricing, most notably the state of Washington, where two recent carbon tax ballot initiatives were defeated at the polls.

Ioana Marinescu, an economist at the School of Social Policy and Practice at the University of Pennsylvania, discusses the challenge of enacting a carbon tax. She also explores policymakers’ efforts to develop carbon tax legislation to appeal to the broad public, and what might be required for these efforts to ultimately succeed.

Andy Stone: Welcome to the Energy Policy Now Podcast, from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. Economists generally agree that the most efficient way to reduce carbon dioxide emissions that cause global warming is by putting a price on carbon in the form of a carbon tax. Consumers, though, can tend to see things differently. The idea of taxing the fuels that run our cars and power our homes and jobs has given Americans pause, and as a result, no carbon tax has yet been levied to date in the United States. Nevertheless, calls for a carbon tax have become more frequent as concern over climate change has intensified. On Capitol Hill, there are half a dozen carbon fee proposals in circulation with backing from liberals and conservatives. States have also explored carbon pricing, most notably the state of Washington, where two recent carbon tax ballot initiatives were defeated at the polls. 

On today’s podcasts, I’ll be talking with an economist about the challenge of enacting a carbon tax. We’ll look at policymakers’ efforts to develop carbon tax legislation to appeal to the broad public, and what might be required for these efforts to ultimately succeed. My guest is Ioana  Marinescu, Assistant Professor of Public Policy with the School of Social Policy and Practice at the University of Pennsylvania. Ioana, welcome to the podcast.

Ioana Marinescu: I’m happy to be here.

Stone: I wonder if we could start by having you give us a brief overview of how carbon taxes work, and why economists prefer carbon taxes over the other options to contain carbon emissions.

Marinescu: Right. Indeed carbon taxes are economists’ pet policy to address global warming and reduce emissions, and that’s because carbon taxes create the right incentives for emissions reduction. The argument is that carbon taxes make carbon more expensive, and when prices of something goes up, then we want to buy less of it. It’s like supply and demand. So that basically means that people and companies are going to use less carbon because the price of carbon-intensive goods goes up proportionally to the content in carbon. Why is that particularly good now? It’s because it allows for flexibility, so that people who really feel like using carbon is very important to them, perhaps because they are a company whose production process cannot be easily and cheaply changed, so they have to use it. Well, they’ll say, “Okay, it’s more expensive but I’m still going to use it because I’m willing to pay that price. It doesn’t make sense to change. I’m still going to use it, or maybe just reduce my usage a little bit and be willing to pay a higher price.” Whereas for some other entities, perhaps another company who finds it very easy to change. They are like, “Ha! Well, if now carbon is more expensive, now I have a great idea to make my production process much less carbon-intensive. Sure, it costs a little bit, but that cost is actually quite small compared to how much I could save in taxes.” And that company is now, bingo! I’m going to make that change and save in taxes.

What you see, if you generalize this with many types of companies and many types of people is that basically those people for whom abatement, meaning reduction in carbon emissions and carbon consumptions is cheapest, are those who reduce it most. And those for whom it’s hardest are those who reduce it the least. This flexibility, you can show in a simple mathematical model that it leads to reducing carbon consumption at the lowest price. Those agents, those actors, those companies, those people who find it cheap to reduce carbon emissions do it first, and those who find it expensive do less of it. In this way the burden is allocated efficiently, so those who can reduce efficiently do so; those who find it hard, don’t. You achieve a much more efficient level of reduction than otherwise.

What is the other typical option? Basically regulation. You tell every company some cap on emissions, can’t emit more than something. I’m not talking cap-and-trade here. It’s just a hard and fast cap on emissions. That system in contrast to carbon tax is not flexible, because it’s the same cap for everybody. The person who finds it very hard to reduce their emissions, they are going to be hit potentially extremely hard to their costs by this cap. They are being told, “Well, no matter what, we don’t care how hard it is for you, just have to keep the cap.” Whereas some other company that would find it easy to reduce their emissions, they are only going to reduce it to the cap; there’s no incentive to reduce the emissions below the cap.

That’s why regulation as in a hard-and-fast cap on emissions is not efficient compared to an equivalent carbon tax, because the equivalent carbon tax would allow those for who it’s cheapest and most convenient to reduce emissions, to reduce emissions the most, and let those for whom emission reduction is hard not reduce them as much. And so that’s basically the story behind why carbon tax is more efficient than regulation when it comes to reducing carbon emissions.

Stone: So that flexibility is really valued it sounds like.

Marinescu: Exactly.

Stone: Let me ask you this. A carbon tax could be implemented at the national level as a countrywide tax, or at the state level. Your work is focused on state efforts to implement a carbon tax. Why the state level?

Marinescu: The state level is very interesting politically, because at the federal level it is very hard to pass any kind of legislation because of, say, the filibuster in the Senate. The process is such that at the federal level, most laws never get passed, whereas the probability that a law passes is much higher at the state level. It’s much easier to achieve any kind of legislation at the state level than at the national level. That’s how states have often become the laboratory of democracy, where new policy innovations are often first implemented at the state level and could be adopted first by other states and then, ultimately, nationally.

One interesting example is the healthcare system in Massachusetts, where so-called RomneyCare, by Mitt Romney, was a system very similar to Obamacare that was implemented first in Massachusetts, and then it was taken as a blueprint for the Affordable Care Act, also known as Obamacare. In that case it’s an example where a state-level policy served as an inspiration, a blueprint, for a national-level policy. It could be the same, potentially, for the carbon tax, if a state were to successfully implement one.

Stone: Like any tax, a carbon tax is a source of government revenue. What do carbon tax proposals generally suggest governments do with the revenue they take in?

Marinescu: There are a bunch of different options. Broadly the most common ones are either spending green, which can take a bunch of different forms, but returning the effort toward environmental spending. Or, returning the money to the people, people or companies, which can also take a bunch of different forms. Broadly, within that category of giving the money back to the people, they could either try to give more money to people who you expect to be adversely impacted the carbon tax, or you could give the same to everybody, or you could try to give more to those people who perhaps need a little bit of extra incentive to be persuaded. This is politics. We’re thinking, is there some constituency that if only we could persuade those people to make a difference—that would also be something policymakers would be thinking about in building a coalition to get a carbon tax passed.

Stone: Washington State is the first state where voters have actually gone to the polls to vote on a carbon tax. There were two carbon tax ballot initiatives based on the two models that you’ve described. Both of those failed. What happened?

Marinescu: In 2016, there was the first carbon tax initiative called I-732 in Washington State. This model was a model of carbon tax where the revenue would be returned to the people in a bunch of different ways. The key thing is that, before I explain how it would be returned to the people, and that means it’s what we call “revenue-neutral.” And what does that mean? It means that the revenue of that carbon tax does not increase the revenue of the government since it’s directly given back to the people. That’s what we mean with revenue-neutral, that allows the money to directly flow back to the people. This 2016 initiative that was revenue-neutral, the way that it was achieving that is through a decline in the sales tax and an increase in the earned income tax credit in Washington State. Those were the main things that were used to get the money back to the people. That’s version one, which again is a revenue-neutral carbon tax where the money goes back to the people.

And version two in 2018 took a different tact and most of the money was spent on green spending. Otherwise, by the way, the two were very similar. Same rate, very similar definitions, or otherwise what the policy was going to be. The key difference was how the revenue was going to be spent. In 2016, it would be revenue-neutral, the money would get back to the people. Whereas in 2018, it would be a green spending carbon tax.

Stone: Let me ask you a question to clarify here. There’s been a lot of talk about fee and dividend, and then there’s the revenue-neutral model that you’ve just been talking about. Can you explain the difference, because I have heard so much about this fee and dividend model as well.

Marinescu: That’s right. The fee and dividend is also revenue-neutral. The fee-and dividend model is, you get the revenue of the carbon tax and then you give it back to the people, but the same for every person. The whole revenue is spent on returning to the people, but importantly in the fee and dividend proposal, every person gets the same amount. That is distinct from the Washington case 2016 revenue-neutral proposal, which was also revenue-neutral, the money was going back to the people, but different people would get different amounts. For example, a key vehicle for getting the money back to the people was the sales tax. People who were paying more sales tax, therefore, would get more money out of this by the reduction of the sales tax, so not everybody gets the same amount. Whereas in the carbon fee and dividend, everybody gets the same amount. That’s the difference. They are both revenue-neutral, but in the case of the fee and dividend, everybody gets the same amount. In the case of the 2016 Washington State version, different people would get different amounts, depending on how much earned income tax credit they would get from Washington State, or how much sales tax they would be paying.

Stone: As you mentioned also that initiative in Washington State, in the year 2016, the bill was I-732, did not pass. It looks like revenue neutrality was not enough to convince people to actually vote for that at that time. Why is that?

Marinescu: That’s right. 40.8% of people in Washington State voted for it, and so it didn’t pass because it didn’t get 50%. In the aftermath of this, people thought maybe this whole revenue neutrality thing is not the thing. Instead we should try a different strategy. By the way, the revenue neutrality is a very centrist, politically centrist view, in the sense that it tries to appeal to moderates on both sides. The hope is that with getting the moderates this would help the policy get across the 50% threshold, and that’s also the thinking right now at the national level for some of the supporters of the carbon fee and dividend. That’s one theory, it says let’s try to get the moderates to support this with a carbon fee and dividend. You might ask, why is this moderate? Partly because it’s revenue-neutral, so that it doesn’t increase the size of government. For more conservative people who don’t want to see the size of government increase, this revenue neutrality is attractive. That’s why this is seen as a moderate position on the carbon tax.

But that failed in 2016. People in Washington State who wanted a carbon tax said, “Well, let’s try something else. Instead, let’s try to energize progressives.” Progressives really care about environmental spending, so that’s how the 2018 version was focused on environmental spending as far as the spending side of the bill. The carbon tax side was the same essentially, but the difference is how they were going to spend the revenue. In 2018 it was going to be all in on green spending, and the hope was that this would bring in a lot more enthusiastic support from progressives, and that this was going to get this I-1631 over the hump of 50%—which didn’t work, because it only got 43.4%. It failed again, though with a slightly better score than the one from 2016.

Stone: What happened? Why did it fail a second time?

Marinescu: As the progressives had anticipated, this 2018 version did actually poll better with progressive. It slightly turned off conservatives but not so much. Really the big thing is that while it increased enthusiasm of progressives, this increase in enthusiasm was just not big enough to get the whole thing over the 50% bar. While it went into the direction that the proponents of the 2018 version expected, meaning that there was more support from progressive ranks, it just didn’t get enough support overall because that extra support from progressives wasn’t big enough to make a difference.

Stone: In that first vote, did residents in Washington possibly turn down the carbon tax because maybe they didn’t believe that they were really going to get all that money back in the revenue neutrality this was planned to give them?

Marinescu: We think that that’s probably an important factor. In our study we’re able to look at the median voters, so the person who might have tipped that over. What we find is that this person seems to feel about the carbon tax as in, “Hey, this carbon tax is going to increase my cost”—we estimate about $266 per year—“I don’t like it, that’s it.” They weren’t factoring in any of the other benefits, including that money was going to come back to them in the form of lower sales taxes or any environmental benefits. For the person smack in the middle of the political spectrum, all they were seeing is this $200-and-something-more cost of energy for me, I don’t like this, that’s it. I’m done, I’m not voting for this. As such it’s consistent with people just not seeing beyond the cost and not factoring in the benefit, including the direct financial benefit, in this case from a reduction in the sales tax. That’s an important obstacle also today for people who are thinking about the carbon tax and dividend, or carbon fee and dividend, because this dividend, you have to have people believe that it’s there and they’re going to get it and it’s going to make a difference.

What people have shown is that, using a French survey, where in France they’ve also been for this carbon tax issue and people were really revved up against it with the Yellow Vest movement, so researchers have looked more into this, and they have found that even if you tell people, “Hey, look, for you, you’re going to get more money out of the dividend than you’ll get for a carbon tax. Do you want to vote for it?” Most people are implicitly saying, “Hahaha. I just don’t believe it, that it’s going to make up for the lost money.” Beliefs are sticky.

Stone: Is there any way to change those?

Marinescu: It’s very hard to change those beliefs. In the case of France, this may or may not apply to the US, but what they saw is that trying to provide people with objective information about the likely impact on themselves and telling them, “Hey, you’re probably going to come out ahead because what you’re getting in a dividend would be more than what you’d be losing for the cost of higher energy,” people weren’t very impressed by that argument, and didn’t change their beliefs very much. If they started out thinking that the carbon tax is bad, they barely changed their mind after they were told that, “Hey, we scientists think that personally you would gain financially,” they just basically, many people just didn’t really buy it.

This illustrates the stickiness of beliefs, and that in many cases it can be quite difficult to convince people who are concerned about the cost of the carbon tax and the impact on their purchasing power. It can be quite hard to persuade them otherwise. I think this is interesting because study was done by economists, so they weren’t a political actor. They just said, “We are economists, here’s what we think is going to happen. Do you want to support this?” People were not very much moved by economists showing them they would gain financially with the dividend. It can be heightened in the context of partisanship. If maybe the other party, not your party, proposes this and is trying to persuade you that you’re actually going to gain financially, maybe you don’t want to believe it, because on top of that you might not trust the source.

This shows one of the complications of getting a carbon tax passed, including a revenue-neutral carbon tax where the money is given back to the people. One of the issues is, do people actually believe that this money is going to come to them and make them whole, basically compensate for the higher cost of energy. Simulations show that with the carbon fee and dividend, which again is not what Washington State did but many are proposing this, where everyone gets the same amount, simulations show that about 70% of the population would gain. The majority would gain financially. Therefore this seems like a no-brainer, something that should pass. I think it’s part of why it hasn’t passed yet is because it is somewhat difficult to convince people that that’s really what’s going to happen, that they’re going to benefit financially, and that people have sticky beliefs, and they also have—we can talk about this—they have partisan, ideological views about how they see a policy that’s also above and beyond the direct impact on themselves. They also have views about what policy they like that isn’t just related to pocketbook concerns, like how much it’s going to cost me. It’s related to how they like this policy in general for other ideological reasons.

Stone: I want to jump into specifically that point that you just raised. In your research, and I’m referring actually specifically to a policy digest that you have published on the Climate Center’s website. Love the title of this one, “It’s Ideology, Stupid.” The subtitle is “Why Voters Still Shun Carbon Taxes.” In that paper you say quite clearly, “Pocketbook issues are dwarfed by ideology in explaining the Washington State vote.” Tell us why ideology is so much more important. We spent so much time talking about economics here, but apparently that’s not the biggest issue.

Marinescu: Both play a role, but really ideology is very important when you’re looking at Washington State and you’re looking at, this voter, they voted no, and this voter, they voted yes, and you’re trying to explain why their opinions diverge. What we show is that their opinions don’t diverge mostly because the person who voted yes was not going to have a large increase in energy costs and the person that voted no voted no because their cost of energy would increase more, which would be the economic explanation, like hey, if it costs me more I’m more likely to vote no. No, that wasn’t the main thing that was going on. Instead, the person that voted no was ideologically anti-carbon tax, and the person that voted yes was ideologically pro-carbon tax.

And what does ideology mean here? We are able to measure ideology by looking at how people voted on a bunch of other referenda that occurred at the same time on topics quite different from environmental issues. Things like gun control. It turns out that people who voted for gun control are much more likely to like the carbon tax. We can compile all their policy preferences, what sort of policy they like, in an index of ideology. You can in this way line up people from liberal all the way to conservative, depending on how they vote on all this myriad of policies. Ideology is another name for your typical policy preferences. With your ideology in hand, I can predict how you feel about the minimum wage, gun control, carbon taxes, you name it. What we find is that in Washington State, ideology is a very good predictor of how you’re going to vote, and that the more liberal you are, the more you are going to be in favor of the carbon tax. That’s true whether it was for the 2016 or the 2018 version. The general tendency is that the more liberal someone is, again in the sense that they support liberal policies, like they want gun control, they want higher minimum wages, and the more the person is also likely to vote yes for the carbon tax. That’s the sense in which we really find that ideology explains more of the variation across different people. If you want to explain why this person voted yes and this person voted no, the main reason is because they have a different ideology.

Stone: You’ve also found that public support for a carbon tax can fall when brought directly to the public as a ballot initiative. Does the research in essence say that referendums can be counterproductive, at least from the perspective of carbon tax advocates?

Marinescu: The referendum was tricky because in 2016, this carbon tax initiative was actually a little bit under the radar. It wasn’t that much talked about and the campaign spending was quite limited. But in 2018, when they came back, the campaign spending increased tenfold and the no campaign spent a lot more, twice as much, as the yes campaign. We show evidence consistent with the idea that all this campaign spending against, and just the general atmosphere of the campaign, really lowered people’s support for the carbon tax. I think the lesson is, you have to come prepared. It’s one thing how good your design of the carbon tax is and the good argument that you have, but you have to also think about the other side, the people and interests and lobbies who are against it. What are they going to say? How are they going to spend their money to counter your arguments and your side of the issue? You shouldn’t underestimate the other side; that can make a big difference.

If you look at polls nationally, you see that more than two-thirds of people say they want the carbon tax, and then you see Washington State, who’s among the more liberal states, and it failed to pass it twice. What gives? We show that what gives is the “campaign effect.” It’s different when you ask about a policy in the abstract—“Do you like carbon tax?” “Oh yeah, great, I love the environment, I want to do something.” And then when it’s a real question, it’s put to you, “Do you want the carbon tax?”, and you’re also hearing the counter-arguments from the no campaign, that could have quite a different outcome and a negative outcome for the carbon tax. It’s not that bringing it to the referendum is doomed, but it’s more you have to think about your communication strategy. We showed that it should be easier in more liberal states, places like Massachusetts. Maybe there, we have a good campaign, they have a chance, even with the adverse campaign of the adversaries, because Massachusetts is quite liberal, has policy preferences that are aligned with liking the carbon tax, they might be able to do it. A key lesson is you cannot take surveys at face value. They are useful, but there is a distinction between what people will say in a survey before they are subject to a whole campaign, and what they say at the polling booth or in their mail-in ballot, after they heard all the pro and against arguments.

Stone: It sounds like what you’re saying here is that people come in with good intentions, or put more specifically, they come in with the intent to support a carbon tax, but then when a public campaign begins, people hear the counterarguments, maybe they hadn’t really thought about things too clearly but liked it on face value, and then some of their beliefs got shaken, rightly or wrongly, by hearing all of this opposition.

Marinescu: That’s right.

Stone: And that creates a vulnerability going into the election. Are referendums a bad idea, or do we really just want to assume that the legislative approach would be better, where legislators within the closed doors in state houses actually go through this whole process themselves without bringing it to the public to vote?

Marinescu: That’s a good question, but it’s hard to tell, because a similar effect can occur among legislators. A legislator, generically, again, if they’re somewhat progressive, they’ll probably generically like this idea. But then once they start to think about all the different interest groups that they might want to represent and whatnot, it could change things. We haven’t done the research to speak in more detail about what is happening on that side, but you could have a similar process, that it’s one thing that maybe theoretically the legislator kind of likes, but then going into the whole process of bill-making and voting, then things could be different. Although, as I said, we don’t have firm evidence on this for the moment, and I think it’d be actually quite an interesting question for further research.

Stone: Carbon taxes bring other concerns along with them, right? Including the potential for a state to lose jobs to neighboring states that don’t have carbon taxes. Have economists quantified the real impact of a carbon tax potentially on businesses and jobs in a state where they have a carbon tax, or would want to have one?

Marinescu: People have looked a little bit at this issue in Canada where British Columbia has a carbon tax, and there isn’t robust evidence that it hurt jobs in British Columbia, for example. They’ve also looked at the carbon tax in the UK, which applied to certain manufacturing industries more than others and those industries that were most strongly impacted didn’t really lose jobs, compared to industries that were less strongly impacted. There isn’t convincing empirical evidence for the fact that having this carbon tax leads to job decrease. What you have to remember is that an economy is very complex and there’s many factors at play. When it comes to a state like Washington, there’s many reasons why a business would want to be in Washington. Maybe it’s access to the coast. Maybe they want to be close to some of the tech hubs in Seattle, and whatnot. There’s a lot of reasons. Taxes are only one of the reasons, and states already have different sales taxes, etc., etc. So this is just one factor among many. That makes a little bit more sticky.

The other thing is that, even if there are some job losses in the area that is covered by the carbon tax, that can be compensated by job creation in less carbon-intensive sectors. Again, empirically we don’t see much effect, and theoretically, once you understand that there’s this many different aspects to decision, and the less carbon-intensive sector could grow, it is also not clear how much difference it’s going to make in the end. I think we are still building the basis of evidence and we’d have to see on a case by case, but let’s say that as of now there is no strong evidence for significant negative impact on jobs from having the carbon tax.

Stone: As you said, if jobs in energy-intensive or fossil fuel-intensive industries fall, then maybe some of those jobs would switch over, for example, to clean energy.

Marinescu: Exactly, exactly. So on that it may not really make a difference.

Stone: These are very difficult times around the world and in the United States due to the COVID crisis. Is this even the right time to be talking about carbon taxes? Given the strain that COVID has placed on state budgets and consumers, a carbon tax looks like an additional burden at the worst possible time. Is this even the right time to talk about it?

Marinescu: Right now any tax is going to be a very bitter pill to swallow because of the state of the economy, and frankly, I just wouldn’t necessarily recommend thinking about that right now at this very moment, because we are in the depth of the very severe recession that is possibly the most severe recession that we’ve known since the 1930s, the Great Depression. But the environmental concerns haven’t disappeared, so we still ought to think about what we can do about the environment, and it might be useful to think about whether we can take certain steps now in terms of environmental spending, or possibly even giving people dividends ahead of time. Can we think about saying, we’ll introduce a carbon tax later, maybe once the unemployment rate has dropped below a certain threshold, let’s say 6%, then we might think about introducing a carbon tax.

For now, we want to already potentially start with some of the benefits. If that were at all possible, it would potentially fight people’s disbelief in the benefits of the carbon tax by saying, “Hey, this is going to happen, so you know it’s happening, but you’re already getting some of the benefits right now.” As far as, for example, you could already give people some of the dividends that are anticipated from the future carbon tax. It certainly makes the policy design more complex, but it could be an opportunity to try to convince people about the benefits of the policy.

Stone: You’re saying distribute the benefit now and then in the future, put a tax on carbon and then basically use that to pay back or pay forward, whatever the correct terminology is.

Marinescu: Exactly, exactly. That would be the idea, in that scheme.

Stone: That would be revenue neutral in its own sense, right?

Marinescu: In the long run, yes. In the long run. Right now it would result in greater deficit, but in the long run it’d be paid for.

Stone: How do you get the message across that a carbon tax could be a tool for economic stimulus? How do you get industry on board with this as well?

Marinescu: To the degree that right now this would come with a stimulus, the short run effect is something that could certainly be argued, and then in the long run, as we discussed earlier today, the impact of the carbon tax really differs a lot by industries, and some industries would actually gain from the carbon tax, because spending will go away from the competitors toward the more greener, less carbon-intensive industries. When we talk about industries opposing this, we want to talk about which industries, because actually some of the industries could be in favor of that. Even including some of the big oil companies, some of them are huge conglomerates that are investing in green energy, partly to cover their risk. But that means while this could mean that the oil-side revenue, their fossil fuel revenues could go down, to the degree that they cleverly invested in carbon-free technologies, the other branch of their business will benefit.

It’s not that completely straightforward that there would be blank opposition from business, because some businesses will actually gain from the carbon tax. It’s certainly a little bit more complicated than thinking that the whole of industry would be opposing this. And actually, it’s interesting because if you look at the Climate Leadership Council, which is a think tank that pushes for carbon fee and dividends, so it’s a revenue-neutral carbon tax where everyone gets the same amount of cash back, it is backed by some of the biggest petroleum companies. Clearly these companies see some opportunity there, of getting ahead of the game with a policy that overall they have some understanding and control over, and again, knowing that a lot of these companies already started investing in green technologies and are hoping to compensate that way.

Stone: And that’s the plan that was put forth by Jim Baker and George Schultz?

Marinescu: Exactly.

Stone: Backed by Janet Yellin, as well. Let me ask you a final question here if I may. With all the insights that you’ve talked about today, how would you apply these to implement a carbon tax in other states? And is Washington State going to give it another shot?

Marinescu: Washington State might give it another shot. I’m hearing some people talk about it. Obviously even though it failed twice there is an appetite for it in Washington State, and many other states. As I said, our study, for example, shows that Massachusetts could be particularly favorable grounds, certainly for a referendum. Now of course, coronavirus is the odd card, because that just makes it much harder, as we just discussed, to pass the tax. Let’s say that it would require a little more creative thinking, even above and beyond what we’ve seen in Washington State. I think the lesson is that you have to pay attention to how the policy speaks to people’s ideology, how it relates to their general world view and policy preferences, and how to anticipate how the opposition is going to campaign against you, and do your best to prepare strong arguments against what the opposition is going to say. And so if in particular you’re able to have a dividend, and maybe even if you give the dividend just slightly ahead of the tax, maybe you don’t need a huge delay, but just a little bit ahead so that the people see the benefit first, that could potentially perhaps change people’s minds.

There are a lot of moving parts to consider, but the research shows that certainly there is a chance for a carbon tax to pass in a liberal state like Massachusetts, provided that the issues around the campaign are cleverly addressed. That would be, again, in ordinary times—I think with the coronavirus crisis things are much more uncertain and complicated, but on the other hand, the environmental problem isn’t going to go away any time soon. We should keep being creative in terms of how we address that with policy.

Stone: Would that strategy of showing the people the money first by giving the dividend ahead of the actual collection of the carbon tax, do you think that might also help to overcome the ideological barrier here? We’ve talked about economics, but the ideological barrier that you talked about earlier as being so central?

Marinescu: Perhaps. Who knows. Perhaps it would make people focus a little bit more on the what’s-in-it-for-me side, and seeing that they’re getting this dividend, and being happy about the dividend that they get, and perhaps slightly lessen some of the more ideological concerns that people have in their minds. Certainly it could help. My preliminary analysis, we run a survey, a national survey, looking at how much a dividend could convince people to support a carbon tax, and we see that moderates, so those who are a bit middle of road on strong ideologues, they are those who are most likely to be convinced by the dividend. It seems like the dividend has a chance to change the minds, indeed, of these liberal voters, and therefore potentially, especially in a liberal state that has already a solid base of support for the carbon tax because the state is liberal, then this dividend could potentially move the moderates to support it, especially if we convince them that this dividend is for real.

As we’ve said before, in Washington State, it seems like the moderates just did not believe in the benefits that were coming fiscally with the 2016 initiative, the decrease the sales tax in particular. People just didn’t really believe it or factor that in. So the dividend, if we may that very clear and potentially paid people slightly ahead of time, that could potentially really help to bring in those moderate voters who are really concerned about their cost to themselves.

Stone: Ioana, thank you very much for talking.

Marinescu: Thank you.

Stone: Today’s guest has been Ioana Marinescu, Assistant Professor of Public Policy with the School of Social Policy and Practice at the University of Pennsylvania. Check out the climate center’s website for our latest energy and environmental policy blogs and research. Our web address is kleinmanenergy.upeen.edu, and our Twitter handle is @kleinmanenergy. Thanks for listening to Energy Policy Now, and have a great day.


Ioana Marinescu

Assistant Professor of Public Policy
Ioana Marinescu is an assistant professor at the University of Pennsylvania School of Social Policy & Practice and a Faculty Research Fellow at the National Bureau of Economic Research.

Andy Stone

Energy Policy Now Host and Producer
Andy Stone is producer and host of Energy Policy Now, the Kleinman Center’s podcast series. He previously worked in business planning with PJM Interconnection and was a senior energy reporter at Forbes Magazine.