Get breaking news alerts via email

Click here to manage your alerts
Bloomberg View: Carbon tax the best answer to climate change
Bloomberg View
First Published Jun 16 2014 06:26 am • Last Updated Jun 16 2014 06:26 am

The best way to reduce emissions of greenhouse gases is to put a tax on carbon. Almost all economists would agree. Yet there’s even wider agreement, and not just among economists, that a carbon tax can’t happen. In the United States, it’s assumed, the idea will always be unpopular.

Join the Discussion
Post a Comment

In case you’re wondering, why would a carbon tax be so much better than quantitative emissions controls like the ones just proposed by the Environmental Protection Agency? Because it allows the greatest possible flexibility in meeting any given target for lower emissions. Unlike caps on emissions from cars or power plants, say, or subsidies for this or that form of clean energy, a tax lets market forces organize the economy’s response. This ensures that emissions are cut where it’s easiest and cheapest to cut them.

To be fair, the EPA’s recent proposals follow this thinking as far as possible. The target of cutting power-plant emissions of carbon dioxide by 20 percent between 2005 and 2020, and 30 percent between 2005 and 2030, allows for a variety of approaches. Within a single sector of the economy — electric power — the aim is to mimic the advantages of a carbon tax. State and regional cap-and-trade systems, operating across the economy as a whole, move closer still to the carbon-tax model. But why struggle to mimic the desirable properties of a carbon tax, with all the complications this entails, if you can simply have a carbon tax?

The standard answer is politics. The EPA can regulate power-plant emissions without new legislation, whereas a carbon tax requires Congress to act. The need to build political support is a formidable obstacle but not an insuperable one.

Granted, some Republicans oppose a carbon tax merely because it recognizes climate change as a problem requiring action. There’s nothing one can do to persuade that group. Many more Republicans oppose a carbon tax — even one offset by tax cuts elsewhere — simply because it is a new tax. Among this latter group, at least, the argument can be recast: The idea is not so much to impose a new tax as it is to reduce government intervention in the economy.

Instead of listing all the fine things a carbon tax could buy — some tax cuts here, a bit of budget-deficit reduction there, and plenty left over for additional spending on infrastructure and other good things — advocates of such a tax should simply offer to give back all the revenue in the form of tax cuts elsewhere.

It’s a worthwhile trade because a tax is by far the best way to reduce carbon emissions, which again is the whole point of this exercise. Consider a modest tax of $16 a ton of carbon dioxide, rising at 4 percent a year above inflation. It would reduce power-sector emissions by more than the EPA proposals for the energy sector would, and curb emissions across the rest of the economy as well.

A $16 a ton tax would also add about 16 cents to the price of a gallon of gasoline and raise household energy costs by 5 percent to 20 percent, depending on the source. Such costs — to "families and businesses," of course, because what politician in his right mind wants to impose a new tax on families and businesses? — are most often cited by opponents of the tax.

The answer is twofold. Yes, families and businesses would be paying a new tax. But no, families and businesses would not be paying more tax. The new carbon tax would raise about $1 trillion over 10 years and almost $3 trillion over 20 — a handy sum. That would be enough to send every U.S. resident a check for about $300 in the first year (with bigger checks to follow) or $1,200 for a family of four. It would be more than enough to cut the corporate tax rate to 28 percent from 35 percent, for instance, or take a bite out of payroll taxes, or some of both.

story continues below
story continues below

This would inevitably lead to an argument over which taxes to cut. At which point, admittedly, the debate could bog down all over again. But at least it would be framed by a shared assumption: that a carbon tax is good policy. It gets liberals a more effective climate policy, and Republicans a less intrusive government.

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.