Pricing Emissions
Is Washington Ready for a Carbon Tax?

A collection of high-profile Republicans, including former Secretaries of State James Baker III and George Schultz and former Secretary of Treasury Henry Paulson, made the case for a carbon tax at the National Press Club this week. This is, of course, not the first time this policy has been pitched from those on the right, and it won’t be the last. But given how different the political landscape looks now than it did a month ago, let alone what it looked like back in 2010 when the Democrats failed to push through a cap and trade bill through Congress, demands a new look at the idea. The New York Times reports on this latest edition of a carbon tax in the U.S.:

The Baker proposal would substitute the carbon tax for the Obama administration’s Clean Power Plan, a complex set of rules to regulate emissions which President Trump has pledged to repeal and which is tied up in court challenges, as well as other climate regulations. At an initial price of $40 per ton of carbon dioxide produced, the tax would raise an estimated $200 billion to $300 billion a year, with the rate scheduled to rise over time.

The tax would be collected where the fossil fuels enter the economy, such as the mine, well or port; the money raised would be returned to consumers in what the group calls a “carbon dividend” amounting to an estimated $2,000 a year for the average family of four.

A carbon tax, which depends on rising prices of fossil fuels to reduce consumption, is supported in general by many Democrats, including Al Gore. Major oil companies, including Exxon Mobil, have come out in favor of the concept as well.

This proposed carbon tax is carbon neutral by virtue of the fact that it would funnel the funds raised by taxing emitters towards a pay-out to American people. In the past, we’ve been more in favor of a revenue neutral carbon tax that would be offset by reducing or cutting payroll and corporate taxes, and in so doing help the United States more firmly gain a foothold in the information economy. This sort of shift in the way the government levies taxes would be a good idea even if climate change wasn’t a problem.

What Baker and co. are proposing doesn’t achieve those same goals, but it would bring the considerable weight of market forces to bear on the problem of mitigating American greenhouse gas emissions, and that sounds like progress. New taxes are generally anathema to the Republican party, but it might be a good time for the GOP to reconsider this idea. It can help reduce our carbon emissions while being sold as a moneymaker for the average American. The fact that it’s being proposed by some elder statesman of the conservative movement doesn’t hurt its case, either.

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