Carbon Taxes

Please refer to the link for reference – Pricing energy right is crucial and maybe a carbon tax can reduce taxes on things we think are good, such as labor and capital. If we want to reduce CO2, we can do that through regulation or through a carbon tax.

Regulation is a type of tax, it just is not very efficient. It appeals to people who just like to tell others what to do, but it is always more complex and does not – unlike a carbon tax – raise revenue. A carbon tax is relatively easy to administer, harder to cheat and it permits individuals and firms to plan. By making carbon a clear cost, firms can target reductions. – VĂ­tor Gaspar, International Monetary Fund.

This elegant tax also have the advantage of focusing intelligence on reducing CO2. If you regulate, the best minds try to figure out ways to avoid regulation. If you make carbon a cost, those same smart guys figure out ways to reduce the cost.

Next up was John Delaney, US House of Representatives (D-MD). He talked about his new bill to tax pollution not profits. He proposes a carbon tax with proceeds to lower corporate taxes (American corporate taxes are highest in the world) and target some to help displaced coal workers and the poor. He said that these are not all optimal places to put the money, but in politics you need to compromise.

Even if you think climate change is a low probability event, the potential costs are high enough to take action now. This action is the most effective. He quoted Wayne Gretzky, the hockey great who explained that you have to go where the puck is going, not where it has been. Regulation tends to be backward looking.

Finally we had Bob Inglis, Energy and Enterprise Initiative. He spent most of his time praising Delaney, who had to leave for a vote. He thought the carbon tax would come, it would go from impossible to inevitable w/o pausing at probable. Both sides need to give. Conservatives need to give on the idea of the tax. Liberals need to make it sweeter by agreeing to reduce corporate taxes. It depends how important they really think climate change is.

These are good events. One of the great things about Washington is that you can continue your education in these ways. And you often get a free lunch.

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