The Case for a Carbon Tax: Getting Past Our Hang-ups to Effective Climate Policy
Dr. Shi-Ling Hsu PhD JD
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Shi-Ling Hsu examines the four major approaches to curbing CO2: cap-and-trade; command and control regulation; government subsidies of alternative energy; and carbon taxes. Weighing the economic, social, administrative, and political merits of each, he demonstrates why a tax is currently the most effective policy. Hsu does not claim that a tax is the perfect or only solution-but that unlike the alternatives, it can be implemented immediately and paired effectively with other approaches.
In fact, the only real barrier is psychological. While politicians can present subsidies and cap-and-trade as "win-win" solutions, the costs of a tax are immediately apparent. Hsu deftly explores the social and political factors that prevent us from embracing this commonsense approach. And he shows why we must get past our hang-ups if we are to avert a global crisis.
breadth of a price signal matters much more than improving any specific technology. 131 Thus, the maintenance of a price signal that is as wide as possible is much more likely to reduce emissions and at the lowest cost than putting massive bets of government spending behind a putative “game-changing” technology. For that reason, government subsidies, as argued above, have the shortcoming of backing only a few horses, and too often the wrong horses, instead of opening up the entire horse race.
an international system of greenhouse gas reduction, or descend into a lawyers’ cornucopia of global legal chaos, likely without any attendant greenhouse gas reductions to show for it? Assume that domestic legislation is in place that offers relief to such industries. A challenge brought to the WTO would seek a declaration that the relief to vulnerable domestic industries was inconsistent with the GATT. A carbon tax may stand a greater chance than cap-and-trade of surviving such a WTO challenge,
reduce greenhouse gas emissions. While coal-heavy states such as West Virginia have exerted pressure through their elected representatives, electricity-generating firms have worked through one of the most powerful trade associations in the world, the Edison Electric Institute, or “EEI,” the trade association of investor-owned electric utilities. Both the Waxman-Markey and the Kerry-Lieberman proposals in 2009 and 2010 provided the disadvantaged coal industries and the utilities that burn coal
passed down to consumers and will energy prices go up? Even when they will, it is made unclear. In both the Waxman-Markey bill, which passed the US House of Representatives in 2009, and the American Power Act (Kerry-Lieberman), which was proposed in 2010 (but did not come up for a floor vote), contained provisions that attempted to protect electricity consumers from higher prices by setting aside allowances that would be dedicated to helping low-income consumers pay energy bills.23 The
emissions, both carbon dioxide emissions from nonfossil sources, and emissions of other greenhouse gases. Apart from these nonfossil emissions, a carbon tax is levied by some governmental authority at some transaction point at which ownership of a fossil fuel changes hands. Thus, superficially, a carbon tax seems to most resemble other consumption taxes, such as a sales tax or a gasoline tax. As will be argued more fully later in this book, this is a mistaken and unfortunate perception.