This week’s “Daily Journal” guest columnist is Dr. Roy Cordato, Vice President for Research and Resident Scholar at the John Locke Foundation.
What do higher gasoline taxes, mandatory renewable energy standards, carbon taxes and carbon dioxide (CO2) cap-and-trade schemes, open space preservation laws, subsidies for ethanol production, and so-called smart growth planning have in common? They are all cornerstones of “progressive environmentalism,” and they all disproportionately hurt the poor. In fact, there is scarcely a policy offered by mainstream environmental pressure groups that could not be analyzed as a regressive tax.
The basic principle accepted by all economists, and the left prior to its domination by environmentalism, is that the costs of taxes or regulations on basic necessities is disproportionately born by the poor. All the policies mentioned above meet this criterion.
Most important of these are policies related to energy. This is because the costs that they impose are the most pervasive and have the most far-reaching effects. This would include all policies meant to reduce CO2 emissions in order to fight global warming. Clearly the main target of the anti-CO2 brigade is energy generated from coal and oil. This includes energy for just about everything that humans need for prosperity and comfort —transportation, electricity, heating, cooling, and all productive activities.
What is typically ignored is that the reason why the use of coal and oil is so pervasive is that they are the least expensive sources for energy generation. To the extent that you limit their use through higher taxes, renewable source mandates, bans on the construction of coal- and oil-fired power plants, and mandates on more expensive alternative fuels for automobiles, the more you limit access to prosperity.
Clearly, these policies drive up the costs of heating in the winter and cooling in the summer. The same policies drive up the cost of transporting yourself and your family to work, doctor’s appointments, and social, cultural, and school activities. But because energy is an input into every production process these policies also drive up the costs of housing, clothing, and all agricultural products, i.e., food. As the super rich like former Sen. Al Gore and Leonardo DiCaprio have shown, they handle these costs with ease. They just calculate their “carbon footprint,” buy their carbon offsets, and continue their lifestyles unabated.
While low-income families of all nations, including the United States, will suffer from these policies, the most harmed are the world’s poorest people. That is, those in developing countries who are trying to exist without any of the energy infrastructure that is in place in the more developed world. No country has been able to become prosperous without access to cheap energy. Wind and solar power won’t cut it. The operation of modern farm equipment and manufacturing plants depends completely on inexpensive, reliable energy sources.
This means jobs cannot be created without it, and prosperity and a tolerable lifestyle are denied. The developing countries of the world need access to coal-fired and possibly nuclear power plants and access to what is the cheapest form of fuel for powering equipment and transportation: gasoline.
It is no coincidence that the U.N.’s Intergovernmental Panel on Climate Change’s warmest “storyline” for the next century is accompanied by the assumption that the developing nations of the world are 60 times wealthier in 100 years than they are today. It assumes that there are no wealth-killing restrictions on cheap energy. In other words, even the IPCC recognizes that unrestricted access to inexpensive energy has the potential to lift millions of people out of their current state of misery. But the regressive progressives on the eco left have no problem cutting off this potential growth in the name of lowering temperatures.
The policy that’s getting some attention in terms of its effects on the poor is the massive subsidy that the production of the corn-based fuel, ethanol, is getting. Corn is a basic food in some of the poorest countries in the world — particularly in Central and South America. In addition, corn is the most widely used feed for livestock, including and especially cows and chickens. In subsidizing ethanol, the U.S. government and the environmentalists who have been advocating these policies are forcing food to compete with fuel for uses of corn. This has dramatically increased the price of corn and consequently the hundreds of products made from corn.
It is also putting upward pressure on the price of chicken, beef, and dairy products. In other words, this policy represents a regressive tax on food. Currently about 20 percent of the U.S. corn harvest is being diverted from food to fuel. And this number is rising. The result has been an 80 percent increase in corn prices since the beginning of 2006. In spite of this, the great advocate for the poor and presidential candidate John Edwards is promising that if he is elected the U.S will produce 65 billion gallons a year of ethanol by 2025. Showing once again that when the interest of the relatively wealthy environmental movement — and in this case its allies at Archer, Daniels, Midland — clashes with those of the left’s traditional constituency, the poor, the enviros win every time.
But energy policy isn’t the only regressive aspect of the eco agenda. Smart growth, land use, and open space preservation all represent a tax on another basic necessity — housing. The entire smart growth, land preservation agenda has the effect of reducing the supply of land available for housing, i.e., to make it more scarce. This causes higher home prices and reduced access to housing for those on the bottom rung of the economic ladder.
Probably the metropolitan area where the smart growth/open space preservation movement has been the most successful is Portland, Ore. As a result, it has gone from being one of the most affordable housing markets in the country in the early 1990s to one of the most expensive today. During the 1990s affordability in Portland fell dramatically, and by the end of the decade the National Association of Realtors ranked Portland the second-least affordable city in the country.
A study by the econometric consulting firm QuantEcon concluded that smart growth policies “deter African-American and other minorities from the housing market at disproportionate rates” and that “ poor and minority families pay a disproportionate amount of the social and economic costs of growth restrictions.”
The North Carolina Division of Air Quality’s Climate Action Plan Advisory Group (CAPAG) will soon release its policy recommendations to reduce carbon dioxide emissions. The proposals will include many of the kinds of schemes discussed here. The consultants hired to formulate these recommendations, primarily with money from very wealthy left-wing foundations, has purposely paid no attention to the impact on low-income families.
The tragedy is that these policies do not accomplish their goal. For example, all of the CAPAG recommendations put together, even if adopted by the entire world, would have no noticeable impact on the climate. What so much of this boils down to is feel-good policy that allows wealthy environmentalists and contributors to their causes to sleep better at night, while lower-income families find it more difficult to afford the basic necessities of life.