Carbon Taxes: The Good and The Bad
Last week's Washington Post carried an interesting op-ed that argued for a carbon tax. The nut graph:
The only effective way to begin reducing greenhouse gas emissions and slow global climate change is to make it more expensive to emit carbon dioxide. Unless businesses and consumers pay a price for carbon dioxide, neither will make the investments in technology and changes in energy use needed to dramatically reduce emissions.
Well stated!
The authors -- two researchers from RAND Corporation -- also put forth a nifty idea about how to cushion the economic impacts of new taxes:
[A]ll the proceeds collected by the government would be returned to Americans each year when they file income taxes....
A carbon dioxide tax with refund is fair because the people responsible for the most emissions would pay the most. The tax would also be progressive. Many Americans with lower incomes would find the refund would more than defray the higher costs of gasoline and electric power.
In short, they call for a per-head rebate, kind of like the Sky Trust idea we've written about already (e.g., deep in the bowels of this post). I love the Sky Trust idea (and, by extension, the idea of a per-head carbon tax refund) since it focuses policymakers' attention on one of the core challenges of climate change policy: how to make it fair, especially to low income folks.
Still, you know me: I love to quibble...
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Car-less Talk
Fans of Alan's "Year of Living Car-lessly" series might want to listen to yesterday's "Sound Focus" program on KUOW radio. (The interview with Alan is the last segment of the program--he 's after Alice Stuart, Robert Bly, and Nancy Pearl).
In the 12-minute interview he discusses what it's like to live as a car-less family and why walkable communities make it possible.
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Important Lesson on Cap & Trade
From an awesomely meaty article on cap and trade from the San Francisco Chronicle, comes this pearl of wisdom (in bold at the bottom of the quote):
The thorniest issue for regulators in California and elsewhere is whether to give away credits to emit carbon dioxide or to sell them. Some European power producers reaped windfall profits when allowances were given away. Several Northeast states are now moving toward auctioning all the allowances. California officials are considering a mix of auction and allocation - and even carbon taxes or fees - and may use different approaches for different groups of emitters.
[Resources for the Future economist Dallas] Burtraw, who serves on a committee that's advising California regulators, said the lesson of the acid rain program is to keep the plan simple and easy for all parties to understand.
"If it starts to employ a lot of special provisions to take care of every party's special needs ... and if it starts to look like the Chicago phone book, then throw it out," he said. "A poorly designed market is worse than no market at all."
I'm not sure I'd go quite that far -- a carbon market's a pretty important thing, and I'd be willing to live with a less-than-perfect system if it's the only one that's politically feasible.
That said -- Amen to the virtues of simplicity! In my view, politicians designing a cap and trade program should be extremely wary of special-interest loopholes, or a system that caters to any particular category of fossil fuel users. Over the long term, the political drawbacks of a clunky, unworkable program will far exceed any short-term benefits from handing out goodies to favored constituencies.
