There’s a fairly decent recap of alternatives for reducing carbon in an op-ed in the LA Times today which I commend to your attention. The op-ed summarizes three alternatives—described as legislative mandate to reduce emissions, cap and trade (the approach favored in Europe to date), and a carbon tax—and in conclusion coming down on the side of a carbon tax.
That’s been my own position for some time but I’ve started to reconsider that for a number of reasons. The first reason for my going wobbly on the idea of a carbon tax is captured in this observation from the op-ed:
And it could be structured to be far less harmful to power consumers. While all the added costs under cap-and-trade go to companies, utilities and traders, the added costs under a carbon tax would go to the government — which could use the revenues to offset other taxes. So while consumers would pay more for energy, they might pay less income tax, or some other tax. That could greatly cushion the overall economic effect.
Well, it could, but our experience with governments raising one tax to offset another hasn’t been too good lately. And what other tax would be offset? A reduction in income taxes tends to favor those who have income that is taxed i.e. the rich. A reduction in property taxes tends to favor those who own property that is taxed. And so on.
But I have another concern as well. A carbon tax will at least at the margins tend to disadvantage businesses that need lots of energy, i.e. manufacturing, relative to those that don’t, i.e. service. The manufacturing won’t just evaporate; it will go elsewhere. Recently, elsewhere has been China.
Manufacturing in China may reduce carbon production in the United States but will it reduce total actual carbon production? I don’t believe it. And it’s my suspicion that smokestacks in China will be harder to bring under control than smokestacks in Ohio.
Isn’t there another way that doesn’t cause factories (and jobs) to move to China? For example, isn’t it possible to provide subsidies for energy-producers to enable them to reduce their emissions?
I hope that someone more knowledgeable than I will comment on this. I admit to substantial confusion in the matter.