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The right argument for a carbon tax, made to the right people

I acknowledge that my arguments in favor of a carbon tax over cap-and-trade are made easier in that I am comparing my ideal hypothetical carbon tax to the actual cap-and- trade programs either passed by the House or proposed in the Senate. Indeed, a cap-and-trade program that included a safety valve and that auctioned allowances would achieve many of the economic advantages of a carbon tax.

The most frequent criticism of a carbon tax is that it would be politically unpopular. But to quote Milton Friedman, I think my role is to “prescribe what should be done in light of what can be done, politics aside, and not to predict what is ‘politically feasible’ and then to recommend it.” You, of course, have the more difficult task of determining what is politically feasible. But given the magnitudes of the costs and benefits associated with any climate policy, I recommend to you a careful consideration of the merits of a carbon tax.

That's Brookings' Ted Gayer testifying before Congress on the merits of a carbon tax. Gayer is having this argument with the right people: Legislators who might not support a carbon tax, but should. Right now, a compromised cap-and-trade plan is more politically feasible, but that would of course change if congressmen stopped being terrible about this and threw in behind the policy that makes the most sense. Full testimony here.

(Via Andrew Sullivan.)

By Ezra Klein  |  December 8, 2009; 3:37 PM ET
Categories:  Climate Change  
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Comments

Wonks support the carbon tax because its transparent and simple. Politicians dislike it because its transparent and simple and would prefer a system that gives them more power (and more incentive for people to do them favors in return for help) If Dem politicians think that global warming is a massive problem then a transparent tax that affects everyone is a small price to pay for that.

Posted by: spotatl | December 8, 2009 4:31 PM | Report abuse

Except for those wonks who prefer cap-and-trade because it has functional climate-preserving advantages over a tax. As an example, see "The Limits of Carbon Pricing: Can High Prices Alone Cut Emissions?" at http://www.businessweek.com/investing/green_business/archives/2009/11/the_limits_of_c_1.html.

Ezra, in previous posts I thought you'd showed a preference for cap-n over taxes on the merits, not only on the political feasibility. Have you changed your mind or am I misremembering what you'd said? I'd swear that you've previously said you're in Peter Barnes' camp over the taxers.

Posted by: JonathanTE | December 8, 2009 4:39 PM | Report abuse

Ezra,
I'm taking this post is in someway "compensation" for your rather foolish labeling of carbon tax supporters as "utopians" in yesterday's blog. It appears to contain cautious support for carbon taxation....

However you seem to issuing a warning, sage political advisor that you are, that carbon taxation must only be discussed within the cloistered halls of Congress in targeted acts of political persuasion. On the other hand, the fools who support cap and trade call yell from the tops of the rooftops for their preferred solution, which is the wrong one.

JonathanTE,
Neither pricing instrument can be set high enough to get us where we want to go fast enough. It will take a combination of disincentives, incentives and investment in public goods to get us where we want to go. The price alone is kind of a wonks dream.

Cap and trade has "go slow" written into and is also functionally anti-business if it were at all aggressive.

Posted by: michaelterra | December 8, 2009 8:55 PM | Report abuse

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