Monday, February 19, 2007

Carbon Tax

After watching the great documentary "An Inconvenient Truth" for the second time, I decided to do some more in-depth research of proposals Al Gore has laid out to reduce greenhouse gas emissions and global warming. In a speech he gave in New York last fall, Al Gore re-proposed a carbon tax which he has been in favor of since his time in the Senate, but now speaks in favor of a revenue-netural carbon tax which would, in fact, replace all payroll taxes.

This is a brilliant idea. Currently, workers and businesses pay taxes on wages for Social Security and unemployment benefits. By replacing it with a carbon tax, you could fund those programs at the same level, while attaining the added benefit of reducing CO2 emissions. It would also be more transparent and effective than the cap-and-trade system (in which companies can trade carbon "credits" with one another) proposed by the Kyoto Protocol, and potentially more politically feasbile than mandatory caps on emissions.

With mandatory caps, you run into a collective action problem where businesses in one nation - and the legislative lobbies that support them - fear a competitive disadvantage with businesses in nations that do not require the same caps. And while "tax" is always a dreaded word in politics these days, there would not be any additional burden on workers or businesses (since they already pay the payroll tax it would be replacing), but again, it would create the desired effect of reducing carbon pollution. Even conservative/libertarian economists could love it, since they like the idea of taxing a "bad" rather than a "good."

Of course, this would just a first step in all of what we need to do to fight global warming and reduce our dependence on fossil fuels, but it just makes so much sense it's hard to understand why it's not being included in the energy/climate change debate more. Let's hope it is soon.

1 comment:

Xanthippas said...

I'm all for it.