7.30.2009

Blowing Off Some Steam About a Lot of Hot Air


The title of this article says it all: "Revenue Increases Should Also Internalize Environmental Externalities." Whether to patch gaping budgets or embed big-government structures, taxes solely as "here's how we can get more money" is dangerous; instead, the tax code should do double duty to incentivize and penalize in ways that reverse distortions caused by various externalities that end users aren't currently fully paying for.

A straight carbon tax would have been a lot simpler than our current cap and trade plan. And, as noted in this article, paying polluters not to pollute amounts to a carbon "protection racket." Every third human on Earth lives in China or India. Both are rapidly industrializing, both are against any sort of effective cap, both will gladly accept payments from US companies to not pollute, and both will be more likely to cooperate if we talked with them about getting the price of carbon right through a straight tax rather than through convoluted cap and trade machinations.

But R's run from the word "tax." And D's like complicated policies that make it look like they're doing something really important. So never mind a simpler solution that will actually align our incentives with the behaviors we want to incentivize.
Post a Comment