The NY Times has published an interesting piece about Exxon and its shifting position on climate change. I want to discuss one section of the article. Here is a direct quote:
Ultimately, the cap-and-trade bill was unsuccessful, passing the House in 2009, but failing to reach the Senate floor. The bill died for many reasons, including a struggling economy. But intense lobbying against the bill by energy companies, including Exxon, had an effect.
In my 2013 paper, we study the determinants of how the U.S Congress voted on Waxman-Markey. Representatives from Congressional Districts that were poor, Conservative and had a high carbon footprint were more likely to vote "No".
So, taking this point as given, the "coastal elites" (and I'm including myself and Tom Steyer) in this group --- need to offer a new deal of the following flavor;
In Econ 101, we teach our students that if you are going to change the prices that people pay for goods that you should consider giving them enough purchasing power so that they can consume their "old bundle" at the "new prices". I recognize that this is taught in the context of Laspeyres Price indices but I'm reposing this as a political issue of how one interest group (the greens) compensates another interest group (the coal people) for agreeing to change relative prices and hence lower their purchasing power.
So let's do an example together. Suppose that Frank consumes 1000 gallons of gasoline each year and 2000 pizzas. Suppose the price of a pizza is 4 and the price of gasoline is 2. To purchase this bundle, Frank needs $10,000. Now suppose that coastal elites seek for the price of gasoline to be $3 because this will "price the carbon externality". Frank is no dummy. He can calculate that this regulation makes him poorer. If he continues to consume his "old bundle" then at the "new prices" he needs to spend 1000*3+2000*4= 11,000. So, this regulation has made Frank poorer. If the coastal elites who support carbon pricing would transfer the $1,000 to Frank then he would not vote against the carbon pricing.
The original 2009 legislation did not have this targeted transfers from progressives to non-progressives and thus the voting results are not surprising. Now, a critic might say; "How will we know who really supports climate change policy? Won't they hide their type and lie and say they want a check to compensate them?"
Read this September 2016 University of Chicago poll, it claims that a large share of people are willing to pay to fight climate change. Let's create a political market to allow them to do so and then we will see how many free riders there are.
I believe that there are gains to trade here. The rich progressives are willing to pay to "buy" the veto from the carbon bill blockers. Let's create the possibility for them to do so. Right now the Clean Power Plan and other regulations are a "takings" of the right to emit rather than an effort to purchase the right to emit. If the coastal people admit that the inland people have a right to pollute, then the Coasian bargaining can begin!