Carbon Taxes

CARBON TAXES….Carbon taxes are clearly a more efficient way of reducing greenhouse gases than a growing hodgepodge of environmental regulations, so it would make sense to quit adding regulations to the pile and instead enact a carbon tax, right? But we don’t. Mark Thoma is puzzled:

Despite the economic superiority of taxes over mandates in terms of the efficiency properties, there is substantial public support for mandates such as CAFE standards over taxes, and mandates continue to garner enough votes in the legislature to pass and be signed into law.

Why might that be? In thinking about efficiency as the primary reason for promoting one policy over the other, I think we might be missing something important: equity. More choice is best most of the time, but when it’s a matter of being constrained, of not being able to do something you want or need to do, people want that constraint on behavior to be shared equally — especially when it involves something as essential to daily life as energy.

….I don’t think policies that allow certain segment of the population to “buy out” of the constraint will find much popular support. If the poor are passed by roaring, gas guzzling, sports cars on the freeway as they drive their gas saving, small hybrid, they won’t feel that is fair.

Hmmm. There’s probably something to this, but I wonder if the initial assumption is really correct? According to the boffins at the Carbon Tax Center, a couple of recent polls suggest otherwise: A Field poll in November showed 72% of Californians in favor of a carbon tax (though, amusingly, “this declines to 53% if the tax were to result in Californians’ paying higher prices for goods and services”) and a BBC poll found 74% of Americans in favor of taxing coal and oil as long as the revenues are earmarked for energy research. So Americans may actually be pretty open to the idea of a broad-based carbon tax.

Republican politicians, of course, are a whole different story. Greg Mankiw can yell “Pigou Club” until he’s blue in the face, but as a Republican himself he knows perfectly well that it won’t do any good because Grover Norquist and the Wall Street Journal editorial page will cheerfully eviscerate any Republican who dares to raise any tax of any kind, regardless of how efficient it is, what it’s funding, or whether it’s revenue neutral. So while transforming public opinion is always important, in this case a salutary drubbing at the polls for the GOP is probably more likely to move us in the direction of a sensible carbon policy. It certainly can’t hurt, anyway.