There’s an ecumenical rift in the carbon policy world. Some favor taxes, while others prefer cap and trade. I’m in the later camp, though I’m sort of a carbon Unitarian: I like carbon taxes too. From a policy perspective, they fit together nicely.
Among the reasons I’m on the c&t side is that taxes can be radioactive, at least in US politics. Now, this isn’t really a substantive objection to carbon taxes as a policy instrument, but the worry seems warranted. Consider how the opponents of climate policy have recently attacked cap and trade: they call it a carbon tax.
Take a look at some headlines:
- Here’s Robert Samuelson in the Washington Post, Newsweek, and elsewhere: “Just Call It ‘Cap-and-Tax’“
- Here’s Michelle Bachman in the Minneapolis paper: “Cap and Trade? More Like Tax and Spend“
- Here’s George Will, just about everywhere: “Cap-and-Trade Is An Unjustified Tax” and “Cap and Trade: A Devious Tax Plan“
Clearly, these pundits believe that taxes are a political poison pill.
Now, before the carbon tax true-believers begin their inquisition, I’ll confess something: cap and trade and carbon taxes are very similar, and in some fundamental ways. Both raise the price of carbon. And both can raise public revenue (though some flavors of cap and trade do not). The principle difference is that taxes have certainty about price, but not about carbon emissions. On the other hand, cap and trade has certainty about carbon emissions, but not about price. Pretty much any economist would agree with this much.
There’s much more to the debate, of course, and there are plenty of substantive reasons to worry about taxes (more on those later, perhaps). But when I see attacks like these, I’m not sure “taxes” per se have much chance politically. That’s just my judgment, of course. But naturally, I’m right.