From Tyler Cowen, explaining (part of) his worldview:
If you study tech, you will see a bright present and also a bright future. If you study K-12 education, you will see a mixed to dismal present and a possibly bright future. If you study energy economics and the environment, you will see an OK present and a dismal future, no matter what policies we choose.
That’s hard to argue with, and it explains why Tyler isn’t sure a carbon tax would do much good (though he favors one anyway). Click the link for a longer list of reasons to be skeptical. Most of them are well taken, but as usual, I’d ask “Instead of what?” That is, even if a carbon tax has limited effectiveness, is it better or worse than the alternatives? My own take is that even if a carbon tax accomplishes only a third of what its supporters hope for, that still makes it a better way of raising revenue than an income tax, a payroll tax, an excise tax, a capital gains tax, a sales tax, or a dividends tax. If I’m going to discourage an activity, even just a little bit, I’d say we’re better off discouraging use of dirty energy than we are discouraging work, imports, investment, or consumption. That’s especially true since the latter taxes seem to discourage the latter activities only slightly, while carbon taxes appear to be reasonably effective at discouraging fossil fuel use. At the margins, and even granting that it’s no panacea, it still seems like a better bet than most of the alternatives.
UPDATE: Reworded slightly to make clear that a carbon tax discourages only dirty energy use, not all energy use. Obviously it encourages people to switch to clean energy like wind, solar, geo, etc.
