• Saturday, February 18, 2012
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Carbon Taxes: Check Your Equations

In this morning’s Washington Post, Rep. John D. Dingell, Democrat of Michigan, makes a circuitous argument for a carbon tax as a tool to combat global warming.

Skeptics have suggested that Dingell’s position is propelled by the auto industry’s desire to avoid proposed federal gas-mileage regulations. Dingell’s carbon-tax proposal, the skeptics say, is actually a “poison pill” designed to thwart any new law from being passed this year.

Whatever Dingell’s motives might be, the idea of a carbon tax has been endorsed by environmental economists of diverse political persuasions. (The Chronicle explored this terrain last year.) In general, economists are much more sour on so-called “cap and trade” policies than they were a decade or two ago. Experience, they say, has shown that cap-and-trade programs are subject to various kinds of distortion and corruption. The carbon tax is said to be a simpler, more flexible, more transparent policy.

In a typical carbon-tax proposal, all carbon emissions would be taxed at an equal per-pound rate, whether they came from your car’s exhaust pipe or from a massive coal plant. Income or payroll taxes could be reduced so that the typical consumer would come out roughly even. Advocates say that the tax would give everyone, from consumers to industries, new incentives to switch to less-carbon-intensive energy sources. (For an environmentalist critique of carbon-tax proposals, see here.)

Harvard’s Greg Mankiw, whose name crops up in Dingell’s op-ed, makes a much more direct argument this morning than Dingell himself: “Cap-and-trade = carbon tax + corporate welfare.”

But Robert Lawson, of Capital University, offers a different equation.

Meanwhile, a future academic blogger, Matthew Zeitlin, who is a high-school student in Oakland, Calif., argues against passing any carbon legislation at all until after the 2008 election.