Taxing Carbon

Should environmentalists concerned about global warming support a quick, simple carbon tax rather than a complicated, long-term cap-and-trade plan?  James Hansen thinks so, but Joe Romm explains the facts of life to him:

1. A carbon tax, particularly one capable of deep emissions reductions quickly, is a political dead end….

2. A carbon tax that could pass Congress would not be simple. Advocates of a tax argue that simplicity is one of its biggest benefits.  Again, those advocates seem bizarrely unfamiliar with the tax code in spite of the fact that they pay taxes every year….

3. A carbon tax is woefully inadequate and incomplete as a climate strategy.  Why?  Well, for one, it doesn’t have mandatory targets and timetables.  Thus it doesn’t guarantee specific emissions results and thus doesn’t guarantee specific climate benefits.  Perhaps more important, it doesn’t allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures — many of which are in Waxman-Markey — that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

It’s true that in some pure economic sense a tax is a more efficient way of pricing carbon than a cap-and-trade plan.  But that’s only if you get exactly the tax you want (you won’t) and only if you accept a very specific sense of the word “efficient” (which you shouldn’t).  And even if you magically got the simple, efficient tax you wanted, a tax lacks the one critical thing that cap-and-trade provides: a cap.  End of story.  If you want to reduce greenhouse gases, the best way to do it is to cap them.  This is something the public can easily understand.  The trading scheme that comes along with it is, admittedly, complex, but it’s only there to allow us to go after the low hanging fruit first and reduce the cost of complying with the cap.  It’s the cap itself that’s key.

Like Romm, I don’t really understand how it is that smart people don’t get this.  Politically, cap-and-trade is the only climate plan that has even a remote chance of getting through Congress, it’s the only plan that institutes a firm limit on greenhouse gases, and it’s the only plan on the table.  Is it really worth giving all that up for the chimera of a tax that has some esoteric technical advantages on a whiteboard, but in the real world can’t pass and wouldn’t solve the carbon problem even if it did?  It’s hard to see why anyone serious about real-world change would buy into this.

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