There's an ecumenical rift in the carbon policy world. Some favor taxes, while others prefer cap-and-trade. I'm in the latter camp, though I'm sort of a carbon Unitarian: I like carbon taxes too. From a policy perspective, they fit together nicely.
Among the reasons I'm on the c&t side is that taxes can be radioactive, at least in U.S. politics. Now, this isn't really a substantive objection to carbon taxes as a policy instrument, but the worry seems warranted. Consider how the opponents of climate policy have recently attacked cap-and-trade: They call it a carbon tax.
Take a look at some headlines:
- Robert Samuelson in the Washington Post, Newsweek, and elsewhere: "Just Call It 'Cap-and-Tax.'"
- Michelle Bachman in the Minneapolis Star-Tribune: "Cap and Trade? More Like Tax and Spend."
- George Will, just about everywhere: "Cap-and-Trade Is An Unjustified Tax," and "Cap and Trade: A Devious Tax Plan."
Clearly, these pundits believe that taxes are political poison pills.
Now, before the carbon tax true-believers begin their inquisition, I'll confess something: cap-and-trade and carbon taxes are very similar in some fundamental ways. Both raise the price of carbon. Both can raise public revenue (though some flavors of cap-and-trade do not). The principle difference is that taxes have certainty about price, but not about carbon emissions. On the other hand, cap-and-trade has certainty about carbon emissions, but not about price. Pretty much any economist would agree with this much.
There's much more to the debate, of course, and there are plenty of substantive reasons to worry about taxes (more on those later, perhaps). But when I see attacks like these, I'm not sure "taxes" per se have much chance politically. That's just my judgment, of course. But naturally, I'm right.
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Comments
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GreyFlcn Posted 5:42 am
16 Jun 2008
The other issue is allowances allow for a huge corruption of the system.
Improper allowance or Improper offsets can both cause the system to fail.
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That why I would argue for Full Auction of Tradeable/Bankable Permits with No Offsets.
And as for the necessary pork to get it to pass. Pull that out of the slush fund created by the auction revenues.
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The crucial part being that this is gives the public a system that even with corruption will continue to work.
Since the slushfund isn't what's important. It's fixing the carbon externality price which matters.
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F James Handley Posted 9:37 am
16 Jun 2008
Lieberman-Warner was fairly described as the biggest tax ever proposed, handing out trillions in free permits and subsidies to political and technological favorites. (Way too early to handicap the technology race. Corn-based ethanol anyone?)
A REVENUE-NEUTRAL carbon tax (or cap) on fossil fuel producers, returning revenue to individuals as a dividend are vastly different than taxes that raise money and dole it out. As Eric de Place suggests, they deserve a different name than "TAX"; unlike the usual taxes, they're not a drag on the economy, aren't regressive and aren't corporate welfare, standard objections to taxes.
Should we call it a carbon disposal fee with dividend? Few object to fees for garbage collection or sewage. A carbon tax would make our energy bills more like most water bills -- pay for bringing it to us and for disposal.
Humans are pumping out twice the CO2 that Earth can recycle. Economists say, "price it or lose it." Right now, prices say "FREE UNLIMITED DUMPING HERE." And we're doing it.
Check out http://www.carbontax.org for more information and news about revenue-neutral carbon taxes.
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