Yes, David, "cap and trade" would be one answer, but not the best one in my opinion. Europe is currently floundering with such a system. In the US we have a great advantage over Europe, a central taxing authority. Therefore, in my opinion a flat carbon tax is better for the US. That said, I respect the argument that governments are not good at putting money to work. Therefore I propose a flat tax that replaces another tax, netting to no new tax. The only other tax large enough to be that other tax is income tax.
The final point Shira raised (in another post) is what to do with families that don't pay any income tax now. Here is how that is addressed: A 250% tax on dirty fuel collects enough revenue to refund $ 2,500 to each and every American household. Think of it as your "standard deduction". This refund compensates you for essentially the first $ 1,000 of fuel you purchased in a year. Buy an efficient car, ride the bus, etc and your cost all net to zero. On the other hand, if you own a lake house and a boat and drive an inefficient car you will end up paying much more.
/kim
On Nov 16, 2007, at 9:08 AM, David Rein wrote:
Interesting discussion. I think what you are arguing Kim is that we don't actually pay the full price for coal power because the costs of its negative environmental impacts are external to market for electricity.
A comprehensive energy plan would account for these impacts by setting carbon targets and auctioning off credits for the amount of CO2 emissions that can be sustained without causing global warming. Power companies like those in Georgia who rely on coal would then have to purchase enough credits to cover their Carbon emissions, and this added expense would create incentives to transition to non-coal fired plants or to find technological mean to sequester the Carbon emissions.
Subscribe to:
Post Comments (Atom)
1 comment:
On Nov 16, 2007, at 2:28 PM, David Rein wrote:
Thanks for the interesting response. I think you raised a few issues here and I'd like to be careful to treat them separately. The first involves the relative merits of a "Cap and Trade" policy versus a strait carbon tax. The second involves what to do with the revenue generated from such a policy.
Re cap and trade versus a carbon tax:
- Given a set level of emissions, there is no difference from the perspective of the consumer provided the carbon credits are auctioned as opposed to allocated. The auctioning of credits works effectively exactly like a tax.
- The main benefit of a cap over a tax is that it allows a predetermined limit to be set on carbon emissions. A tax rate would need to be adjusted based on empirical data, and in response to changing economic conditions in order to achieve a targeted carbon reduction amount. Every adjustment would open the tax back up to the political process. This is a major disadvantage.
- Problems common to both systems is that a. both rely on lawful compliance and penalties for cheaters (like the income tax system), as it would be impossible to keep tabs on all production all the time, and b. both are seriously compromised by regional as opposed to international solutions. If we have an effective tax on carbons in the US, but China and India do not, and we pass no legislation to restrict imports from countries that don't control their carbon emissions, then we should expect any production that is able to to move overseas.
- Not that you would argue this, but a leftist critique of both cap and trade and taxes would argue that neither address the underlying problem of consumer capitalism that requires continual production expansion to sustain itself.
In terms of what to do with the extra revenue? That's a nice problem to have, and I suggest we fight over it when we cross that bridge. I don't think anything inherent to controlling carbon and methane emissions with taxes leads to a natural conclusion that the tax system needs to be overhauled although we may find that is a nice unexpected consequence of the program once it’s enacted.
Post a Comment