Why a Carbon Tax is Better Than Obama’s Cap and Trade

This weekend, former Treasury secretary Hank Paulson weighed in at the New York Times abouyt the need for more urgent action on the climate front, and described how various indicators of how quickly climate change is taking place, such as the speed of Arctic and Antarctic ice melt, are moving much faster than models had predicted.

Paulson, who has long been an ardent conservationist (and in contrast to his alpha Wall Street male standing, lives modestly), made a forceful pitch for carbon taxes. The irony of this proposal is that we have a Republican showing what a right-winger Obama really is. Without mentioning the recent Administration carbon scheme directly, Paulson’s article make the case for more forceful and effective intervention than cap and trade, a central part of the Administration’s proposed “pay to pollute” program.

…viewing climate change in terms of risk assessment and risk management makes clear to me that taking a cautiously conservative stance — that is, waiting for more information before acting — is actually taking a very radical risk. We’ll never know enough to resolve all of the uncertainties. But we know enough to recognize that we must act now.

I’m a businessman, not a climatologist. But I’ve spent a considerable amount of time with climate scientists and economists who have devoted their careers to this issue. There is virtually no debate among them that the planet is warming and that the burning of fossil fuels is largely responsible….

We need to craft national policy that uses market forces to provide incentives for the technological advances required to address climate change. As I’ve said, we can do this by placing a tax on carbon dioxide emissions. Many respected economists, of all ideological persuasions, support this approach. We can debate the appropriate pricing and policy design and how to use the money generated. But a price on carbon would change the behavior of both individuals and businesses. At the same time, all fossil fuel — and renewable energy — subsidies should be phased out. Renewable energy can outcompete dirty fuels once pollution costs are accounted for…

A tax on carbon emissions will unleash a wave of innovation to develop technologies, lower the costs of clean energy and create jobs as we and other nations develop new energy products and infrastructure. This would strengthen national security by reducing the world’s dependence on governments like Russia and Iran.

I wish Paulson had made his case years ago. The more popular solution heretofore has been cap and trade, which Gaius Publius described in a recent “explainer” post:

According to the League of Women Voters, this is what a carbon tax looks like (my emphasis and some reparagraphing throughout):

CARBON TAX

As typically envisioned, a carbon tax would be imposed on fossil fuel suppliers at a rate that reflects the amount of carbon that will be emitted when the fuel is burned. The tax would be included in the price of the coal, oil and natural gas supplied to wholesale users and ultimately passed on to consumers in the price of electricity, gasoline and other energy-intensive products. Coal, which generates the greatest amount of carbon per unit of energy (BTU), would be taxed at a higher rate per BTU than oil or natural gas.

By raising the price of carbon-based energy, the tax would create incentives to reduce energy use, stimulate demand for more energy-efficient products, and promote a shift to cleaner fuels and renewable energy.

Note that last — “promote a shift to cleaner fuels [methane] and renewable energy [wind, solar, etc.].” You could do either or both, depending on how you designed the tax. For example, methane gets a “bye” when it comes to leakage under the current EPA “Clean Power Plan” (see here for details). It’s almost as if the EPA had written a Methane Plan.

But a carbon tax doesn’t have to give a pass to methane. If the tax accounted for rates of methane leakage — methane itself, before burning, is a much more powerful greenhouse gas than CO2 — it would price (and punish) methane fairly for all of its carbon emissions effects. After all, methane is a greenhouse hydrocarbon before burning (CH4), and it produces CO2 after burning. It leaks from all kinds of places — fracking fields, transmission lines, energy plants, liquid natural gas (LNG) facilities, etc.

If a carbon tax took all of that into account, it could eliminate as much carbon emissions from all sources as it wished to, instead of just favoring one source of emissions over another, as the current plan seems to do.

Now what may not seem obvious is that under a cap and trade regime, emissions are supposedly capped and various participants get to trade allowances, and in some schemes, offsets. That leads to bad side effects. First, Wall Street was eager to get into the cap and trade market when Europe launched a cap and trade program. As in other markets, the traders benefitted from price volatility. But uncertainty is anathema to investors. Unpredictable prices for carbon discourages investment in new, cleaner energy technologies and energy-saving programs. The Financial Times, in an editorial in 2007, describe how We need a clear and predictable price for carbon:

The way forward is a framework that compensates developing countries for the costs they bear, but also encourages the most efficient possible use of energy resources. The buying of rights to emit by high-income countries from developing countries is one way to achieve this result. A common tax regime, with accompanying cross- border transfers, would be another.

The crucial requirements, however, are three: a clear and predictable price for carbon emissions across the world; much increased investment in research and development in renewables, nuclear power and carbon capture and storage; and arrangements for transfer of best technology across the globe.

This is a huge, long-term and global challenge that involves difficult questions of justice both within and across generations. Humanity’s ability to address it is a test of its capacity to manage the consequences of its own actions. So far it has failed. It can afford to do so no longer.

Second, cap and trade rewards past bad conduct. As Greg Mankiw, another Republican who prefers carbon taxes, argued in 2007:

I am less fond of cap-and-trade programs than Pigovian taxes because they, in essence, give the revenue from a Pigovian tax lump-sum to a regulated entity. Why should an electric utility, for example, be given a valuable resource simply because it has for years polluted the environment? That does not strike me as equitable. A new firm entering the market should not have to pay for something that an incumbent gets for free. And the fact that the incumbent has for years been taking a valuable resource from the rest of society is no reason to think it deserves a free ride in the future. On equity grounds, one could just as easily argue that the incumbents should compensate society for their past misdeeds.

Cap-and-trade systems are also relatively inefficient, for two reasons. First, they encourage utilities to pollute more before the cap-and-trade system is put into effect in order to “earn” pollution rights. Second, they waste the opportunity to use the Pigovian tax revenue to reduce distortionary taxes on labor and capital…. One exception: If the pollution rights are auctioned off rather than handed out, then cap-and-trade systems are almost identical to Pigovian taxes, including all the desirable efficiency properties.

Third, the experience with past carbon trading schemes has found them to be rife with fraud.

So while it is good to see some movement on the climate front in the US, the Obama plan is no solution, due to its failure to include methane emissions (which means it is a huge sop to the fracking industry) and its reliance on the flawed device of cap and trade for enforcement. Carbon taxes are a far sounder route, but Hank Paulson’s call for them is about seven years overdue.

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44 comments

  1. John

    Good post and brings up the issue of true “costs.” Prominent economists have convinced everyone that cheaper is better, which has led the world towards the mad dash to the race to the bottom. What many of these misinformed economists fail to calculate are the C02 emissions and subsequent end-of-life waste when products and services are produced and sent to the landfill when they are no longer needed.

    When China produces an iPhone is it necessarily cheaper to produce there? What is often ignored is the environmental and health disasters for such production. Places like Beijing or Shenzhen are so polluted it is causing many early deaths and contaminations to the food and water chain. Who is paying for the indirect costs to fix these things? I witnessed young Chinese die from untreatable cancers. What induced these cancers? Its a sure bet the polluted environment had something to do with it. Chinese leadership realized some time ago they do not have the money to provide adequate healthcare to their population. That iPhone you bought in fact has a steep price tag.

    Corporatists have managed to shift a big chunk of “true” costs over to developing countries, carefully avoiding any accountability towards the environmental costs.

    Back to topic. Any form of carbon tax can be rigged. Here in Belgium everyone pays some sort of carbon tax. We pay taxes on C02 for the cars we buy. But if you are a large company, well, you get a special deal. Our government has set aside millions of euros to offset the tax for firms. Their rationale? Well, we don’t want to make our industry non-competitive and for them to leave. C02 pollution is C02 pollution and we will all pay at some point.

    1. Banger

      I think the rhetorical switch you indicate is critical. We should be looking at true costs. If we can agree to set up a scheme that taxed goods, not just energy, based on true costs which is, today, theoretically possible we’d be moving toward a sane world.

      1. different clue

        We could call it “Truth In Pricing” if anyone thinks that is a useful phrase. ( If this comment nests out of order, it was for the “True Costs” subthread.)

    2. digi_owl

      Economists are experts at one thing, brushing “externalities” under the proverbial rug…

  2. Swedish Lex

    Sweden likes to boast about its Carbon Tax history, starting in 1991:
    http://dailycaller.com/2013/09/06/obama-learn-from-sweden-home-of-the-carbon-tax/

    However, if one adds all the air travel that Swedes do across the globe, in particular to warm destinations like Thailiand, the CO2 embedded in all the consumer goods that are imported, the picture is not so pretty.

    A global CO2 tax could be a soluation. That will only happen if either or both of the EU and the U.S. goes ahead and creates a CO2 tariff, thereby pushing the rest of the world along. Sarkozy had some ideas in this direction ca 2007, but then he completely lost his mind (really).

    1. Banger

      Yes, you are right. One way to impose an international carbon tax is for U.S./E.U. countries to impose a tax on imports based on the true costs to the earth of their manufacture. As a practical matter, this tax should be small and move gradually to fairly draconian levels. Of course, the problem is that this upsets the whole trend towards “free” trade and corporate mastery of the nation state.

      The political consensus in the U.S. at least does not exist for doing anything about climate change like imposing a carbon tax–cap and trade is almost worse than doing nothing so I don’t favor that because the whole thing seems like an opportunity for fraud which is already, in the U.S., at epidemic proportions.

      1. different clue

        If we cancel every Free Trade Agreement we have, and withdraw from every Free Trade Organization we are a part of; all the way back to Truman’s GATT Round One if necessary; then we will have the economic soveriegn freedom of action to impose the Carbon Skydumping Tariff which you describe.
        Protectionism makes unilateral decarbonization possible. Free Trade keeps runaway carbon skydumping inevitable.

        Free Trade is the new Slavery. Protectionism is the New Abolition. Someone should write a manifesto about that.

    2. digi_owl

      And that is the problem, unless you get the biggest markets to all play ball on the rules nothing will happen.

      We can see this with the various negotiations where either China or USA have managed to stall the whole thing by refusing to reduce anything unless the other one does so first. All in all a Mexican standoff of international scale…

      1. different clue

        Until America abolishes Free Trade and restores Militant Belligerent Protectionism, we will be helpless against the Class Enemy Investor Class who moved and keep moving all our production to foreign Carbon Havens.

  3. Fair Economist

    C’mon Yves, don’t fall for the Republican BS. Cap ‘n trade is somewhat more “conservative” but modeling indicates both methods have similar results. Obama and most democrats switched from carbon taxes to cap ‘n trade because they thought the Republicans would at least agree to that. Whereupon the Republicans immediately proceeded to demonize cap ‘n trade and talk endlessly about how carbon taxes are the only solution – including McCain, who had made a big deal out of his cap ‘n trade bill.

    This whole cap ‘n trade vs. carbon tax controversy has been whipped up by the rightwingers to delay *either*.

    1. lolcar

      Meanwhile in Australia a carbon tax is to be repealed by a hard-right government in favour of a “direct action” plan. Expect that to be the next rhetorical side-step. Do not expect an explanation as to why they are now in favour of a policy in 100% contradiction to their “market solutions are always better than ham-handed government interference” ideology.

    2. Yves Smith Post author

      Since when is the Financial Times part of the Republican Party?

      And Mankiw’s support dates to 2007, well before Obama had said anything on this topic.

      1. sherparick

        Yves, I know you kind of believe in the Green Lantern theory of the Presidency, but really Congress is the institution that enacts bills into laws, which a President can either sigh or veto. A President can support a basic outline of a bill, she can negotiate what she would be willing to sign, she can lobby Senators and House members to vote for a final bill, but a majority of both houses (and do to recent practice, 60 votes in the Senate, super majority) to enact a law. Given the current Tea Party commitment to climate change denial, and general anti-environmentalism (if the Senate goes Republican you can expect a bill to abolish the EPA and the Clean Air Act and to threaten a Government shutdown/default on the debt to obtain a ban on Obama’s CO2 rules), I don’t see a single Republican vote for a Carbon Tax. Also, Democratic Senators from Louisiana, Arkansas, West Viriginia, and Ohio are probably no votes. The Labor Party in Australia just lost an election because of a reaction against a Carbon Tax to a Movement Conservative creature of Rupert Murdoch (who then surprised the electorate with a budget that begins the destruction of the Australian Social Democratic State, something most voters were not expecting). Until environmental movements start once more as grass root movements and join in coalitions that promote higher pay, guaranteed jobs, and employment security, you are not going get support for things like a Carbon Tax. .

  4. wes

    Germany just went over the 50% threshold for solar energy production. How did they do it?

    1. Paul Tioxon

      They did it by political agitation of the Green Party and legislative action making it a deliberate policy of the government to produce solar and wind in conjunction with one another. One of the key political alliances was that of joining with farmers who could make money by generating wind energy. This worked well, because solar electric panels on top of roofs in densely populated urban areas had a place to go were complemented by the night time production of wind energy, due to the increase of wind just when the daytime generating capacity of the sun was ceasing. The Green/farmer coalition just happened to work out and the more conservative areas of Germany were brought on board with an idea that had the practical outcome of providing a useful and lucrative stream of income from owning large tracts of land that could easily accept wind turbine towers in numbers to generate the electricity needed to hit the policy goals.

      This does not seem like a hard idea for America to follow. Once you travel outside the urban areas of the Pennsylvania Turnpike, along the hills of PA, you can see strings of towering wind turbines crossing the side of the hills along the topside of the range. This has been in place for over a decade now, but of course, the new republican governor is too busy with Karl Rove and Big Oil turning PA into Texas East with the Marcellus Shale to be bothered. You know, it a hippie tree hugging impractical thing to use PA steel mills to build thousands of wind turbine towers and install them on farms and the ridge line of the hills.

      1. different clue

        You can see bunches of them through the traincar windows if you take Amtrak’s Capitol Limited train from the Midwest through Pennsylvania and Maryland into Washington D.C.

      2. sherparick

        Germany is a parliamentary democracy and the United States is not. In a parliament, a party like the Greens who win at least 5% of the popular vote can get critical seats and use that leverage to obtain policy goals in return for supporting a coalition Government. Most of the Federal Republic’s environmental laws were enacted during the SDP-Green coalition of Gerhard Schroeder from 1998 to 2005 (that Schroeder is something of crook and entered questionable business relationships with Putin after he left office is to remind ourselves that in this Vale of Tears we need to work with the flaw instruments that we can find). Further, unlike the American Republican Party, the Australian Liberal Party, and the Tory right-wing in the U.K., the German Christian Democrats (CDU-CSU) are small c-conservatives, formally pro-Church (German has established Christian Religions – Roman Catholic, Lutheran, and Evangelical (but not fundamentalist) supported by the State), an interested in actually governing and improving the condition of the populace with a tradition of “natur lieben” so they have always been sympathetic to the goals of the Greens and skeptical big business (whose political instruments in Germany are the Free Democrats and the right-wing of the SPD).

        Just to snark a bit, I do wonder sometimes if Yves and some of the commentators ever took an American civics class or really paid much attention to state and local politics in overfly country. It does not appear that any of you are familiar with right-wing talk radio which has come to dominate the political discourse of much of the country outside the coasts and big cities these last 25 years. Until the nineties most people, conservative as well as liberals, considered themselves “environmentalists,” But starting with Rush Limbaugh, that word has become a tribal “hate” word standing in for “hippies” who want to take away one’s “freedom” to own an F-150 truck or similar hulk and AK machine pistol. It would be really nice if Hank Paulsen wrote a letter to John Boehner and ask the House to vote through a Carbon Tax. If he does, then we can blame the Democrats and Obama if it stalls in the Senate and Obama does not sign it into law. But until then I will take the second best I can get.

  5. DakotabornKansan

    RE: Obama’s “pay to pollute” Cap and Trade

    In 2009, Matt Taibbi, “The Great American Bubble Machine,” wrote that Cap and Trade (carbon credits) was the next new commodities bubble:

    “The new carbon credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.”

    “President Obama conservatively estimates that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount…

    “The feature of this plan that has special appeal to speculators is that the “cap” on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually; for comparison’s sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion…

    “If cap-and-trade succeeds, won’t we all be saved from the catastrophe of global warming? Maybe — but cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap-and-trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it’s even collected.” – Matt Taibbi, The Great American Bubble Machine,

    http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405

    According to a report by the U.S. Congressional Budget Office, a carbon tax is the least-expensive, most effective and most transparent of climate change solutions.

    http://www.cbo.gov/publication/41663

    The Green Party supports the carbon tax.

    http://www.gp.org/press/pr-national.php?ID=708

    Politicians favoring a carbon tax will be confronted by their counterparts, who will claim that emissions can be reduced without taxing gas, while conveniently neglecting to mention that their cap-and-trade alternative will produce the results described above by Matt Taibii.

    1. sherparick

      Perhaps I missed it, but is the Green Party about to take the Senate seat in Mississippi? Or is it Louisiana or Georgia or Texas? How many members of the House of Representatives are Greens? None it appears the last I looked, certainly none coming from West Virginia. Recently, Conservative Republican Eric Cantor was beaten in a Republican primary by a Libertarian Christianist who whose big issues are anti-immigration (which in the context of Central Virginia congressional district he will likely be representing me from means anti-brown people with Spanish surnames) and writing the current fundamentalist/Roman Catholic Christian doctrine on sexuality (abortion, anti-contraception, and anti-homosexuality) into the Law of the Land. He also follows a real incoherent combination of the economics of Ayn Rand and the theology of John Calvin while being a practicing Roman Catholic (which as a sometimes practicing RC myself I find really strange), the practical result being that he would abolish the entire Great Society, New Deal, and TR’s Square Deal, including Social Security and Medicare if he could get the votes. Professor Brat regards Climate Science as a liberal/Marxist/secular humanist conspiracy and pro-solar and pro-wind policies as “cronyism.”

      Just to be clear, if I was made the Galactic Overlord and could point my ray-gun at John Boehner, Harry Reid, Mitch McConnell, and Barack Obama, I would tell them to pass a stiff carbon tax pronto, or else vaporization. But, alas, I am not.

  6. JuneTown

    The Green/left’s connection to cap-and-trade goes back to NRDC’s adoption of ‘market-based solutions’ to environmental problems. It is one policy disaster that can be timely turned around today.
    The CBO researched so-called market solutions that included carbon tax as an option and found carbon tax can be done cheaper and quicker than any other option.
    And so, the reason enviros (NRDC, etc) are not endorsing the carbon tax over C&T is……..?
    Perhaps their corporate partnerships??
    Thanks for the post.

  7. Carolinian

    So Paulson wants a regressive tax that will add to increasing (and mostly under the radar) inflation that is burdening ordinary people with higher food prices. Add in more world government and (if FT gets their wish) more nuclear power. What could go wrong?

    My alternative: restore income taxes to their pre Reagan rates and use the money to create an NIH for renewable energy as well as subsidizing solar installations and insulation upgrades. Also enact much higher CAFE standards for cars and “guzzler taxes” on large luxury vehicles.

    Of course my “from each according to their ability” version is just as unlikely as the recessionary carbon taxes which is why the politicians, Dem and Republican, are basically doing nothing.

    But I would suggest the options here are not just carbon tax versus cap and trade. Fresher ideas may be needed. In the end a cure for global warming may not be that compatible with capitalism as we now know it. Therefore proposed solutions from those who have such a large stake in the current system should, perhaps, be regarded with suspicion.

    1. lolcar

      A carbon tax can be as progressive as you want to make it. Committing to keeping fossil fuel prices low on the grounds that inflation will hurt the poor just encourages everyone to use more fossil fuels. And since the rich spend much more on energy most of the dollar benefit of the subsidy goes to them.

      1. Carolinian

        Sounds good on paper but how exactly would that work? At any rate Paulson’s proposal sounds like a straight btu tax.

        And the rich with their private jets etc of course spend more on energy but that’s a trivial expense to many of them. For a low income person who has to drive 20 miles to work it’s a very big expense. Hence such a tax is “regressive” in the same way sales tax is.

        1. lolcar

          Like I said you can make it as progressive as you want. If the carbon tax raises the energy bills for the average family on the poverty line by $500 a year, send every family in the country a check for $500. The poor family ends up even-steven. The rich family that perhaps spent 10 times as much on energy before the tax might see it’s energy bills go up $5000 and ends up $4500 in the hole.
          All that being said, if I were king of the world I’d be truly radical and go for full war-time style rationing. Give every citizen irrespective of income an exactly equal but tradeable carbon ration in kilograms. Once you’ve used your full carbon ration, that’s it. If the billionaire wants to keep flying his private jet he’s going to have to buy the extra rations on the open market. Presumably if his timely appearance at a meeting on the other side of the country is really so economically valuable he’ll be prepared to pay the cost. Otherwise, he’s on the bus with everyone else.

          1. jrs

            Yes exactly and MANY carbon tax proposals that have been made propose exactly such offsets. Really it’s not rocket science …

        2. different clue

          Here is an article showing how the faster you push a vehicle through the air over a set distance, the more fuel you burn to push it through that same set distance. To turn that relationship upside down, the slower you push a vehicle through the air over a set distance, the less fuel you burn to push that same vehicle over that same distance. The air resistance against the vehicle moving through that resistant air increases at some kind of cube of the rising speed of the vehicle. At some point the air resistance goes up very fast and the mpg goes down very fast. That is why the Nixon Administration sought energy-crisis-era legislation imposing a 55 mph speed limit on Federal Interstate Highways . . . to force the use of less fuel than before in going the same distance as before. A carbon tax against gas and diesel could accomplish the same thing. Here is the link.
          http://www.lowtechmagazine.com/2008/09/speed-energy.html

          1. ewmayer

            That article makes 3 very large errors, 2 of omission and 2 of commission, which need remedying before one should draw any sweeping conclusions:

            [1] It entirely ignores rolling resistance, which dominates the total-drag profile for automobiles at low speeds. At high speeds it is of course overtaken by aerodynamic drag, but the point of equality is typically around city-cruising speed of 35 MPH, though this is somewhat design-dependent.

            Formula 1 cars are a very poor analogy to invoke because unlike passenger cars, they need to do huge amounts of violent acceleration/deceleration and high-G-force cornering at high speed, requiring huge downforces and fat, sticky high-rolling-resistance tires. In other words, they are evolved for a very different set of “selection pressures” than are passenger cars, where the applicable high-speed operating mode is low-G-force cruising.

            [2] The “cubic rule” for aerodynamic drag cited in the article neglects one key fact, which is that for bodies moving through a fluid medium such as air the drag coefficient varies with speed (more precisely with Reynolds number, which for a given object is linear with speed). Check out this page, in particular the text beginning with Figures 2-3. By taking advantage of the phenomenon of delayed flow separation for a turbulent wake one can actually design vehicles whose drag-vs-speed profile improves at highway speed – this is why modern high-MPG cars don’t have the famous “teardrop shape” one sees in so many concept cars of yore. The teardrop is impractical from a manufacturing and trunk-shape perspective, i.e. it is much preferable to have a bluff rear end. Since that guarantees flow separation and a turbulent wake, one optimizes for a minimum-drag wake. The squared-off “chopped tail” rear profile of cars like the Prius are a deliberate design to that end.

            [3] Real world propulsion systems, from a bicyclist’s legs to the IC engines in cars to the turbofans in jet planes, tend to have very strongly speed-dependent efficiency, which starts at 0 when at rest with engine idling, climbs to some optimal “sweet spot” which is typically as much a function of power plant design as of basic physics, and then decreases as speed continues to rise and the engine begins to “labor”. (A simplification, but you get the idea). That is why as one reduces the speed of one`s auto one`s MPG decreases only up to a point, beyond which it again begins to climb as speed is reduced further, reaching 0 MPG at 0 speed (idling).

            [4] In the real world, one must factor in the phenomenon of “speed is economy”. People are willing to pay extra to get from point A to point B in less time, with the “willing premium” depending on many factors such as purpose of travel, geography – mainly overland or not – and convenience of accessing it (e.g. family car usage vs waiting for hours and getting groped by TSA agents in order to fly).

            I’ll close with an example illustrating both points [3] and [4]: One of the many reasons the Anglo-French Concorde SST was such an uneconomical boondoggle was that its high-tech engines were designed to operate with maximal efficiency at a “sweet spot” cruising speed of Mach 3-4. But supersonic drag for such a craft is optimal around Mach 2, and as higher speeds would also require extensive use of Titanium – expensive to machine and hard to work with – in the airframe, the design used lower-strength-and-cost Aluminum. Thus you had a plane which was still comparably fuel-guzzling as a Mach 3-4 beast like the SR-71 spyplane, but whose speed advantage over a conventional jet aircraft was not sufficiently high to make the Concorde an economically attractive proposition for most of the business-traveler market.

    2. Banger

      I’m not so sure about raising the income tax but let’s just look at the idea of using the Federal government to fund alternative energy research. First, this would reverse the course away from social democracy that both political parties are on–is this feasible? Second, is the government competent and honest enough to actually fund real research or will we end up corruption where $100 will buy you, say, $40 worth of work?

      1. Carolinian

        Well the government has been subsidizing renewable production which the Repubs turned into one of their big Fox News scandals not that long ago.

        I guess my point is that some class warfare would give cred to a global warming solution rather than have the general public–who must of course be supportive–seeing it as something mostly imposed on them from the top down.

        Plus the rich should be making a greater contribution to the public welfare and it would leave them with less cash to make mischief with. There was a time when concentrations of wealth were considered a bad thing and the top rate as high as 90 percent.

        All just a dream of course but the wheel is going to turn eventually. The “Reagan revolution” may have finally run its course.

        1. Banger

          But see the left offers no alternative. The people only see that now they have to pay more money. If the left said–ok, we will raise energy prices and, in return, give you X, meaning something tangible–that’s the way you do politics. Instead the left just makes sermons indicating we should be glad to pay higher prices without presenting a clearly articulate benefit that would result. I personally believe my life would be better off if I didn’t have to drive so much–so how are we going to live in a better world where I and people I know who have to spend an 60 to 90 minutes of commuting time or endless time having to shop and so on.

          The public perceives all government actions as all penalty and no benefit and they are correct in that perception. That is why we need a radical deconstruction of government so we can reconstruct it along rational grounds.

          1. different clue

            What if some clever leftists were to call themselves “Eisenhower Liberals”? They could agitate to “bring back the Eisenhower tax rates” and etc. Make an issue of it in public.

  8. Banger

    This is really good news and reflects what I’ve heard about the actual feeling of many in the elites. At present, all policies must come from the top–it is up to the oligarchs whether we do anything about climate-change there is no pressure from “the people” to take action on climate change in the U.S. at least and very little chance for that pressure to build unless some major faction of the elites start agitating for change. That agitation can only come from the top of the pyramid, i.e., Wall Street. There are solid constituencies that oppose all environmental regulation–Big Oil, the MIC, auto industry, and so on. It should be interesting to watch. We can help, of course, but the impetus must come from people like Paulson until the left can get is head out of its ass enough to organize a real vision of society that isn’t just a hodgepodge of platitudes.

    1. Carolinian

      Those elites still have to be voted into office by all those little people. Don’t hold your breath waiting for this to happen. There’s considerable resistence to just raising the gas tax to recharge the highway fund. Or as the WashPost put it, “resistence in an election year.”

      Believe me, if there’s one volatile issue out in the heartland it’s gas prices. It used to be said that presidential approval ratings were inversely proportional to their fluctuations. Car use overall is going down so that may not be quite so true as it once was but don’t expect much enthusiasm from politicians for carbon taxes.

  9. Dan Lynch

    As Carolinian stated, a carbon tax would be a highly regressive tax. Sure, in theory it could be accompanied by a tax credit to offset the cost, but what is the actual chance of that happening? Where is my tax credit for the regressive state and federal gas taxes? Where is my tax credit for my regressive state sales tax? Where is my tax credit for my regressive local property tax? Where is my tax credit for my regressive FICA tax?

    Credit or no credit, the bottom line is that a carbon tax would result in the rich continuing to fly their private jets — it’s a tax deductible business expense, after all — while the 99% make the sacrifices. That’s not democratic !

    Another problem is that a carbon tax would have no guaranteed outcome for greenhouse emmisions. For example, raising the price of gas would not have much impact on gas consumption. Instead, people would continue to drive — because they have to — but they would have less money to spend on other things.

    Rationing and regulations are the only schemes that I can support. Rationing is democratic and it was proven to work in WWI and WWII. The outcome of rationing is predictable — if you reduce the gas ration X%, then gas consumption will decline X%.

    If you want to encourage solar, then give every American home free solar. If you want to encourage wind, then the government is quite capable of building wind generation. Stop relying on conservative market-based schemes and let’s get back to the New Deal philosophy of direct government action.

    1. lakewoebegoner

      While I’m definitely pro-environment, in the big picture, taxing each average middle-class American’s energy footprint = poll tax as I imagine any plan to tax CO2 and/or BTU and/or methane will conveniently leave discreet exemptions for big-ticket items like private jets, tractor-trailers, air travel, fracking, etc.

      A good extant analogy are road taxes. A 4,000-lb. car does a fraction of the damage for pavement as a 80,000 tractor-trailer. But on a “per pound of road damage” basis cars are much more taxed than tractor-trailers—effectively car drivers subsidize the trucking industry.

      1. Banger

        Excellent point. But this is a general problem with our current government set-up–every level of gov’t has been captured by some or many segments of the oligarchy who have no interest in the welfare of the public. We should demand a government that will offer us something tangible.

        First, we need to do away with representative government and have a scheme of direct democracy–with some brakes on that to take advantage of the wisdom of crowds.

      2. Mel

        “Pay me now or pay me later” as the saying goes. What you push onto the trucking industry in gas taxes you pay later on in retail prices. Another version of this saying is “The customer pays for everything.”

        1. different clue

          “The customer pays for everything.” As well they should. The consumer should pay for all the costs of the consumer’s consumption. Truth In Pricing.
          Under a Truth In Pricing regime, the only way to charge consumers a lower True Price is to impose fewer True Costs upon the product/service in question.

  10. Nat Uerlich

    Yes, a carbon “tax”* is better than cap and trade. But does it pass the minimum threshold for effectiveness? And isn’t it another instance of neoliberalism’s cognitive capture of political dialog?

    This three-part essay is a must read before answering the questions: http://neweconomicperspectives.org/2014/05/explaining-conflict-obamas-climate-policy-obamas-energy-policy-pt-1.html, http://neweconomicperspectives.org/2014/05/explaining-conflict-obamas-climate-policy-obamas-energy-policy-pt-2.html, http://neweconomicperspectives.org/2014/06/required-180-degree-pivot-climate-energy.html.
    ____________________

    * “Fee” is a more appropriate term. Fee recognizes that the atmosphere is a commons and that its use requires payment to those who own it, i.e., all of us equally.

  11. TarheelDem

    I would settle for seeing gas taxes move from an absolute cent to a percentage basis as a first step. But not even that is possible because of the widespread impact commuters who have limited choices of how to get to work.

    The choices that have to be changes through taxation are not consumer choices; they are moving away from fossil fuels to the extent that their incomes permit. It government purchases and business investments that today swing the most weight and the ROI for fossil fuel companies is distorted by massive tax subsidies.

    Absent higher incomes or public transportation choices or different building energy cost structure, carbon tax looks like just another hit on ordinary people with little practical results.

  12. MLS

    A simpler carbon tax is bound to be much more effective than a convoluted cap-and-trade. While both will end up being exploited, twisted, and abused by corporations and policitians over time, at least with the carbon tax it will much easier to tell who is doing the twisting.

  13. KenG

    “Obama’s cap and trade”? If he dictatorial powers or even if he just had control of his own party for the few months in 2009 when the Democrats had 60 votes in the Senate and the house majority, he would have implemented a carbon tax. But he has neither, so cap and trade was the only potentially viable option. Let’s see if the house “leadership” is willing to bring it up to a vote, or if the Republicans in the Senate wouldn’t filibuster a carbon tax bill before you blame it on Obama.

  14. Eli Rabett

    And, of course, Paulson advocated strongly for a carbon tax when Secretary of the Treasury and his campaign has been continued by the Republicans controlling the House. Oh wait.

  15. different clue

    These seem like good counterpoints to the extent that I can even understand them. I wonder if other people here could say whether these counterpoints simply cancel out what the article I offered says . . . or whether they co-exist with them and modify them without ruling them out altogether.
    I suspect people owning a car of whatever sort could do their own amateur home science with this . . . spend some time driving a long distance at the fastest legal speed and then drive the very same distance at a lower speed, and do it at each speed enough times to have a good comparison, and then see which speed
    required average less gas for the exact same course at which speed. (Or would the rolling resistance of tires on road itself change at different speeds irrespective of the air the car was moving through?)

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