A Carbon Tax Hail Mary?

On both the left and the right, there are mutterings that the Senate should ditch cap-and-trade legislation in favor of a carbon tax. But is a carbon tax the silver bullet its supporters claim, or simply a product of wishful thinking? 

At an Energy and Natural Resources Committee hearing on climate policy this week, Republican Sens. Lisa Murkowski of Alaska  and Bob Corker of Tennessee repeatedly suggested that a carbon tax would be simpler and more transparent than a cap-and-trade scheme. Corker has also argued that a tax could return the revenues to consumers via rebates.

For carbon tax fans, these kinds of remarks are signals that their favored policy isn’t a lost cause. That’s the case made by the US Climate Task Force, a project founded by former Clinton administration officials Robert Shapiro and Elaine Kamarck.

Earlier this week, the group unveiled new polling data this week commissioned from Hart Research Associates, which it says shows that Americans overwhelmingly prefer a carbon tax to other forms of regulating greenhouse gas emissions. The majority of respondents reported that they have not heard of either the carbon tax or cap and trade. Without hearing an explanation of the concepts, 29 percent had a negative view of cap-and-trade, while 36 percent said they have a negative view of a carbon tax. But after some explanation, 58 percent said they liked the idea of a carbon tax, compared to 27 percent who favored cap-and-trade.

These results aren’t exactly convincing. The respondents only picked the tax once they received a personal explanation of two very complex policy options. It seems like unrealistic to expect that this type of comparative explanation could be undertaken for the population at large.

And the idea that the carbon tax is suddenly politically viable seems similarly naïve. Apart from the recent comments from Corker and Murkowski, very few senators have indicated that they would vote for a carbon tax. Proposals offered by Rep. John Larson (D-Conn.) in the House, and a tax-like bill  introduced by Sen. Maria Cantwell (D-Wash.) in the Senate have gone nowhere. For all the difficulties that cap and trade is experiencing in Congress, it has been able to attract enough votes to pass the House. The carbon tax hasn’t even come close to winning that measure of support.

Advocates of a carbon tax argue that it’s better because its simpler, and so it wouldn’t encourage the giveaways and concessions over allocations and subsidies that have watered down the cap-and-trade bills. But if lawmakers suddenly launched a carbon tax bill tomorrow, there would be the same scramble by industry groups to carve out loopholes and exceptions. “Coal interests would have the same reaction to a tax that they would be to cap-and trade,” said David Hawkins, director of the Natural Resources Defense Council’s climate center, at the hearing. “They would be looking for exceptions. A tax approach sounds simple when your talking about it from a theoretical standpoint, but you’re going to confront exactly the same considerations that you’re talking about with a cap.” The biggest problem here isn’t with cap and trade. Its with the special interest-driven politics of the US Congress.