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A tax on carbon to cool the planet

Forcing higher prices for fossil fuels would be simple, fair, and effective. Why do politicians fear to do it?

Conservative and liberal economists like it. James Connaughton, President Bush’s top environmental adviser, backs it. Al Gore says he’s always preached it. So why isn’t a carbon tax on the table in Congress as it weighs measures to curb climate change? A three-letter reason: T-A-X.

From the start of Capitol Hill’s debate on global warming, the notion of taxing all uses of oil, coal, and natural gas has made lawmakers look for less direct ways to wean the nation off fossil fuels and onto alternative energies. They’d rather set caps on greenhouse-gas emissions (with allowances to trade emission permits) and tighten up regulations, such as fuel- efficiency standards.

Indeed, caps may put the US on a knowable track to, say, an 80 percent reduction in carbon emissions by 2050. But as the previous Monitor’s View pointed out, the flaws in cap-and-trade plans as experienced in other nations – their complexity and vulnerability to fraud and special-interest lobbyists – would reduce the intended effect. They also take a long time to set up and get working right. And, in the end, they also raise energy prices for consumers, just not as directly as a tax.

Economists agree that the real cost of burning fossil fuels – damage to the environment and health, not to mention the cost of replacing them as they run out – isn’t reflected in today’s prices. A carbon tax would directly send a market signal to reduce carbon use. And it would provide an incentive for investment in renewable sources, especially if the tax is set at the source: for natural gas, at the wellhead; for coal, at the mine entrance. Oil would be charged at the refinery because petroleum products create different levels of emissions when burned.

The World Resources Institute calculates that a tax of $15 per ton of carbon-dioxide emissions would double the costs for coal use and raise gasoline prices about 13 cents a gallon (or about 5 percent, at today’s prices). Natural-gas prices would rise less than 7 percent. That would result in a 12 percent reduction in CO2 emissions.

Have enough Americans been persuaded by Mr. Gore and unusual weather to accept such pocketbook sacrifices? Nearly half of them now see the danger of global warming. Yet polls indicate strong opposition to higher taxes on gasoline or electricity. But wait: What if the carbon-tax revenues were returned to most taxpayers, canceling out the effect on pocketbooks but retaining the market incentives?

Under one plan, every worker would receive a tax rebate of about $560, cutting the tax bill by 18 percent for those earning $20,000, or by 4 percent for those earning $90,000. The burden on consumers would shrink, but the US would achieve greater conservation and a shift to energy alternatives. And the tax could be fine-tuned to meet rising targets for reducing carbon dioxide.

With Europe’s cap-and-trade system faltering, the US should be a leader in using a carbon tax, even if big polluters such as China don’t follow. As a last resort, the US could tax goods from countries that fail to cut their carbon emissions.

A carbon tax is not the whole solution. Regulations will still be needed, such as stiffer fuel-economy standards for cars and trucks. And the US should fund research into alternative fuels, too. All it takes is the political will to act.

(via csmonitor)

8 Responses to A tax on carbon to cool the planet

  1. A carbon tax would work if its revenues were used and only used to replace fossil fuel plants with nuclear fission plants and windfarms/hydropower/etc. Some of the revenues might also be used to fund prizes for anyone or any organization that creates a nuclear fusion reactor that produces net positive energy. The tax money would only be spent if the requirements of the prize were met, just like the X-Prize.

    But I doubt it. If the government imposes the Carbon Tax, it will most likely spend its revenue on stupid bullshit like multi-million-dollar outhouses and other garbage. You know why? Because the government is BIG and stupid. Just another reason for another tax to expand government size.

  2. A carbon tax would work if its revenues were used and only used to replace fossil fuel plants with nuclear fission plants and windfarms/hydropower/etc.

    The truth is that while spending any revenue generated by a carbon tax on energy alternatives like those you describe is a great idea, it is not why a carbon tax will reduce emissions.

    The problem a carbon tax addresses, is the negative externality caused by carbon emissions. The goal of a carbon tax is to ensure that the full costs of someones actions are internalized.

    But I doubt it. If the government imposes the Carbon Tax, it will most likely spend its revenue on stupid bullshit like multi-million-dollar outhouses and other garbage

    Many proposals for a carbon tax are actually revenue neutral, so the amount the government collects from the carbon tax is discounted from other forms of tax. This means that those that emit little carbon could see a total reduction the the taxes they pay, while those that emit lots of carbon would see a tax increase, thus encouraging people to emit less carbon.

  3. I doubt punitive measures are that effective in reducing excessive CO2, replacing fossil fuels with other energy is a much better idea. Can you imagine how much CO2 emissions France would be producing if 80% of its energy production wasn’t nuclear? Punitive measures would not reduce such emissions as well as nuclear power.

  4. A carbon tax is not punitive, it is merely an attempt to internalize costs. This means that all costs of an activity (such as burning fossil fuels) are incurred by the user. This allows them to make a proper cost-benefit analysis since they are responsible for all the costs of their actions.

    The reason such a strategy works is because it makes producing dirty products more expensive (currently many of the costs of CO2 and pollution are subsidized by society as a whole, and thus not reflected in the final price), and makes clean products cheaper.

    By ensuring that all costs are incurred by the user, the free market can function as it should.

    Nuclear power is currently one of the best alternatives to create ‘clean’ electricity, but there are still serious concers (and no really good options) about what to do with nuclear waste that lasts tens of thousands of years.

  5. At least the large discrete chunks of radioactive waste from nuclear fission plants are better (easier to put away) than the tons of ash baring radioactive elements from coal-fired plants (this ash is spewed into the atmosphere).

  6. The carbon tax is punitive. If you don’t think so, imagine refusing to pay it. What happens? Armed government thugs approach, that’s what happens. Taxes in general are punitive because they use the threat of violence to force people to pay. If there is a solution that doesn’t involve threatening people with violence, then that solution should be sought instead.

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