Carbon Tax: A Primer

There is an interesting bipartisan movement afoot to deal with climate change by putting a price on carbon through taxing upstream energy producers who use it. This would be beneficial environmentally, economically, industrially––and it would produce immediate benefits for the consumer. The idea seemingly becomes popular with both conservatives and moderates after every presidential election, but it is now being endorsed by some Democrats. This shows that it may have staying power this time, which is a perfect reason for liberals to get on board.

University of Chicago professor and Nobel Prize-winning economist Milton Friedman often said that what the country doesn’t want, it should tax. Things like income, for example, he believed should be taxed less, whereas things society wants to discourage should be taxed at a higher rate. He also was a fan of the negative income tax, which would redistribute dollars to the lowest percentiles of the economy.

The carbon tax has the potential of saving the environment at a time when the Great Barrier Reef is dying, carbon is flooding the atmosphere and causing nonlinear global warming and large sections of permafrost are emitting methane into the atmosphere that will only further cause human, environmental and economic tragedies.

There are differences among environmental and energy economists about the rate at which carbon should be taxed. But RepublicEN leader and former Republican Congressman Bob Inglis believes a carbon tax would encourage businesses to take the impact on natural resources into account when they sell their environmentally degrading products. It would also result in cutting a “dividend” check to each American for around $2,000 per year, similar to the Alaska Permanent Fund.

In addition to bulking up the environment’s sustainability and replenishing Americans’ pocketbooks, a carbon tax would encourage innovation in the industry. Nuclear energy and renewable energy will surely take off even more than they are now. Carbon capture and storage can mitigate some of our dirtiest power plants. Advanced technology will spread to deal with the climate problem and move the industry’s standards forward.

The consumer will also benefit. Having improved national security and building a 21st century grid to transport and store renewable energy will allow Americans to become disentangled from Middle Eastern politics and war. It will increase the reliability of energy as the industry lowers prices for energy and modernizes to appeal to the consumer.

These environmental, economic, industrial and consumer benefits will last if the United States adopts a strategic policy to manage climate change. We need strategic planning right now. We are approaching emergency territory with climate, as the Department of Defense and insurance companies have begun to factor climate change into their planning. The poor, those along the coasts and those in tropical areas may face particular threats. While some may argue that now is not the time for a carbon tax, the sooner we act to prevent this threat, the less we’ll have to deal with the expensive aftermath of climate disasters.

There is currently a caucus in Congress called the Climate Solutions Caucus dedicated to advancing climate legislation and groups like the Citizens Climate Lobby are advocating for a federal solution to climate change. The rules of the caucus reflect its bipartisan nature: to join, a member must also get a commitment to join from a member of the other party. The caucus favors a carbon tax.

We have to do something now. Most reservations about a carbon tax are based on a misunderstanding of the proposal or potential economic effects. Critics claim it will increase inflation (although inflation is already low and dire predictions about inflation have turned out to be false in the past decade). Critics claim there are better ways to legislate climate change prevention (all past proposals have failed and this solution has conservative and moderate support). It will require a careful strategy to convince those on the left to take this practical, market-based approach to stopping climate change. Count me in for this effort to bridge our preconceived divides and actually try something to mitigate the damage from one of the greatest dangers we face in our lifetime.

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