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Jul. 28 2010 - 5:28 pm | 39 views | 0 recommendations | 2 comments

A middle ground on climate change

Noah Millman has another excellent post up at The American Scene. Here’s his take on fighting climate change – though you should really just read the whole thing:

What would be the consequences of implementing a tax on carbon only in the United States, without coordinated global action? You’d see some carbon-intensive activities move offshore to lower-carbon-cost regimes; this would probably increase the global carbon load. You’d see some reduction in carbon-intensive activities; this should reduce the global carbon load, but some proportion of this reduction would be due to a simple drop in consumption and hence lower economic growth. And you’d see some increased private investment in making existing activities less carbon intensive, and in providing non-carbon energy sources to substitute; this should also reduce the global carbon load, and any associated economic cost should be temporary. It’s difficult to predict what the net effect on carbon emissions would be in the short term – but it doesn’t really matter, because the goal isn’t to directly reduce emissions but to encourage that investment in incremental innovation.

Of course, the tax on carbon will itself have a negative economic effect. But this could be offset by reducing other taxes, the payroll tax and the corporate income tax being two obvious targets.

This makes sense to me. Millman also advocates government investment in technology that can be used to remove carbon from the atmosphere. I’m less certain that public spending on this will really amount to any tangible advances in technology, but I could be wrong. I think the government should start looking at ways to reform utility services. In a green, sustainable energy economy, granting monopolies to utility companies will simply not work. It’s time for a real energy marketplace, and the government should play a role in setting up that marketplace and then do its best to stand out of the way and let the market do the rest.

A carbon tax is going to be a part of this, but I think revisiting how we subsidize energy and especially fossil fuels will be equally important. Yes, taxing something we want less of is a great way to get less of it, but we should also stop subsidizing it! And I also agree that we could offset productivity-killing taxes like the payroll tax if we were to implement a carbon tax, replacing a bad tax with a good one. How could you not like that sort of trade-off?


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  1. collapse expand

    Using the carbon tax to subsidize innovation would act as a multiplier in terms of carbon reduction, as well as spurring economic growth. Replacing the loathsome income tax with these revenues would be a zero sum game, even if politically popular.

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