Cap or Tax to Solve Global Warming?
Posted September 14, 2007
Someone has asked about carbon taxes at every public forum on global warming policy that I have participated in recently. This idea has been around for a long time, but has been largely dormant in policy circles since 1993, after the defeat of the BTU (energy) tax proposed by President Clinton as part of his first budget. Academic economists and columnists often argue that a carbon tax would be the most efficient and simplest way to address global warming and Rep. John Dingell, Chairman of the powerful House Energy and Commerce Committee has flirted with the idea publicly, raising its political profile.
I was asked about carbon taxes versus caps in an interview on E&ETV, which aired Monday. My answer was that discussion of a carbon tax is a distraction because it frames the debate in fiscal policy terms (How high should the tax be? What should be done with the revenue?) rather than keeping the focus on how much and how fast we need to reduce global warming pollution to prevent dangerous global warming.
I will add here that the claim that a carbon tax would be simpler than a cap on global warming pollution with allowance trading is based on comparing a theoretically pure carbon tax with no exemptions to cap proposals that are being debated in the real world. That’s not a fair comparison. It’s fantasy to think that an actual tax bill would be any simpler than an actual cap bill. In fact, the BTU tax was killed in 1993 after industry lobbied successfully for a bunch of exemptions, and then cynically lobbied to kill the whole thing because it was full of loopholes. One clever lobby shop went so far as sending blocks of Swiss cheese to Members of Congress.
There is no escaping the fact that the legislative process resembles sausage-making. But legislation to cap and reduce global warming pollution will at least be environmental sausage.
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