“You can rank carbon regulations, carbon cap-and-trade, and carbon taxes however you wish. But at the end of the day we’re better off with no policy rather than bad policy.”
To continue from Part I yesterday, the carbon tax–on paper, on the white board, in the ivory tower–is better policy than cap-and-trade, which is better than ad hoc regulation. We could spend – and have spent – hundreds of hours explaining why cap-and-trade is a horrible idea, and why regulations are often blunt-objects that often cause huge unintended consequences, but that’s beyond this post.
And an ideal carbon tax can be shown to have only modest damage to the economy.
But where are carbon tax proponents, particularly conservatives, wrong about carbon taxes? The answer provides a much longer list.
First, carbon taxes are not strictly a tax on “bads” (i.e.…
“The tax will not be implemented in the politically aseptic world of academic modelers, but in the real world of intense political pressures. Its assumed purity will not survive the onslaught [as demonstrated by] … Sanders-Boxer [where] the carbon tax is treated as a huge honeypot for allocating money to powerful groups, including overseas interests.”
The carbon tax, a serious proposal supported by some thoughtful people, deserves careful consideration. This tax is the subject of an extensive and often technical literature with top scholars making proposals for Resources for the Future and for the Brookings Institution. [1] The term “carbon tax,” however, has a chameleon-like quality, meaning something different in each of three different contexts.
Three Rationals
In the context of economic theory, the carbon tax is a way to deal with an imperfection in the energy market.…
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.…