Innovation for the climate through innovative policy

The extreme policies of the “green new deal” present an opportunity for Republicans to discuss climate change in a realistic way and to acknowledge an issue most voters believe is real—all while differentiating ourselves from the far left and climate deniers.

Republicans like Reps. Greg Walden (Ore.) and Fred Upton (Mich.) deserve credit for promoting technological innovation as a foundation for solving climate change. America’s ability to out-innovate the world is well established, and the same ‘can do’ spirit that succeeded at space travel and built the internet can certainly be applied to low- and zero-carbon energy solutions.

Sen. Lisa Murkowski (R-Alaska) framed the ongoing debate succinctly during a recent hearing:

“There is no overnight, magic-wand solution, as much as many would want it to be that way. We simply don’t have unlimited amounts of taxpayer dollars. We can’t simply replace markets with mandates and call it good. And so even as we take real steps to promote clean energy, know that I’m going to be working to fully protect our energy security as well as keeping our energy costs affordable.”

Policymakers have three policy tools with which the government can encourage greater levels of clean energy innovation: put a price on carbon; issue mandates and regulations; or subsidize the use of favored technologies.

As the debate advances, the greatest contribution Republicans can make to crafting effective climate policy is sound economic policy. We should avoid regulations and subsidies in favor of a market-based solution.

The politics of putting a price on carbon may be difficult, but lawmakers should embrace the challenge for a solution that adequately addresses the problem, has the lowest cost, and can grow the economy.

The Alliance for Market Solutions, alongside a growing number of economists and free-market advocates, maintains that a price on carbon—offset with cuts to other distortionary taxes and regulations—is the best option based on affordability, effectiveness, and ability to incentivize innovation.

In fact, a recent analysis by EY shows that a reasonable carbon tax, when matched with regulatory rollback and an extension of the expiring Tax Cuts and Jobs Act provisions, will greatly benefit the economy and lower carbon emissions.

Approaches that do not rely on free-market principles are fraught with a variety of problems. For example, policies like the establishment of a federal clean energy standard would be similar to the Obama administration’s Clean Power Plan. These command-and-control programs inevitably face lawsuits, opposition, and countless backdoor attempts to avoid compliance. Regulations and mandates also cost more and are less effective than a well-designed carbon tax.

Conservative lawmakers roundly criticized those who advocate for a long-term extension of subsidies through the use of tax credits, yet this approach is again being considered despite the fact that many of these technologies are cost competitive. The structure of these credits remains under scrutiny since it is always the government “picking winners and losers,” and everyone wants to be a winner. Tax credits also cannot account for rapid technological innovation.

Republicans have a tremendous opportunity to show that we are still the party of bold ideas that rely on the innovative spirit that only the free market can deliver. By promoting policies that ensure transparency and true market-based competition in exchange for decreased taxes on earnings and income and a moratorium on costly regulations Republicans can be responsible stewards of both the environment and the economy.

Bud DeFlaviis is the director of government relations at the Alliance for Market Solutions.