The major premise of the International Monetary Fund’s carbon tax proposal is the concept of social cost. According to the IMF, fossil-fuel consumers do not pay for all the harm they do to public health and the environment. Hence, the IMF reasons, fossil energy is under-priced, society consumes too much of it, and corrective (“Pigouvian”) taxes are needed to achieve “efficient” energy markets.

The IMF acknowledges that social cost of carbon (SCC) “estimates in the literature have varied considerably, ranging from $12 per ton (Nordhaus, 2011) to $85 per ton (Stern, 2006).” The IMF’s “estimates assume damages from global warming of $25 per ton of CO2 emissions, following the United States Interagency Working Group on Social Cost of Carbon (2010), an extensive and widely reviewed study.”

Actually, the Interagency Working Group recommends that agencies use four SCC estimates to calculate the per-ton benefits of CO2 reductions: $5, $21, $35, and $65.…

This summer Australia implemented a new tax on the country’s top 500 carbon emitters, which has already led to significant increase in electricity prices. Meanwhile, on August 2, Congressman Jim McDermott (D-Wash.) introduced his own carbon tax bill in the House of Representatives, which like the Australian tax is targeted at certain disfavored emitters.

Talk of a federal carbon tax has been recently revived by several conservative-leaning groups. Earlier this year Robert Inglis (former Republican Congressman from South Carolina) launched the Energy and Enterprise Institute, a new advocacy group aimed at marketing carbon taxes to Republicans. And last month rumors of carbon tax discussions at the American Enterprise Institute led AEI’s own Ken Green to reiterate his opposition to the carbon tax idea.

What sets the new conservative proponents of carbon taxes apart from traditional advocates is revenue neutrality.…

“Even in flush economic times, carbon taxes would be bad policy. When economies are already laboring under too much spending and are at diminishing-return levels of taxation, implementing a carbon tax would be a mistake.”

– Kenneth Green, Dissecting the Carbon Tax, The American, July 13, 2012.

Open-mindedness is a mark of scholarship. And some great lights of classical-liberal social thought in the 20th century changed their minds for theoretical/empirical reasons from a utilitarian perspective.

F. A. Hayek began as a democratic socialist. Milton Friedman started as a FDR New Dealer and Keynesian. [1] Friedman later in life even moved away from his (naive) view of a fixed-monetary rule where, as he once put it, a computer program could manage the money supply. [2] Turns out that ‘money supply’ is not a fixed, known quantity; turns out that money is a government monopoly subject to politics.…

On August 8, 2011, EPA published the Cross State Air Pollution Rule (CSAPR) in response to the court decision, North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), which vacated the Clean Air Interstate Rule. But instead of building on the lessons learned of successful programs, the rule makes so many changes to the cap-and-trade provisions that pollution reduction is in real doubt. Moreover the changes are so extensive that reliability impacts are possible.

CSAPR Rule

The rule requires 23 states to reduce annual SO2 and NOx emissions to help downwind areas attain particulate matter and ozone ambient air quality standards. This rule replaces EPA’s 2005 Clean Air Interstate Rule with three different cap programs.

A 2012 annual SO2 cap is set at 3,385,929 tons as compared to the recent (average 2008 to 2010) emissions of 5,216,931 tons.…