Or: How I Learned to Start Worrying and Love the Carbon Tax
You can’t blame the Mayans for being a year off in predicting the end of days; how could they have anticipated the invention of the Hummer?
By all accounts, 2011 has shown some serious apocalyptic murmurs. Earthquakes and Irene jarring New England, tornadoes battering 21 states, two major rivers flooding, droughts parching the Southwest, and huge blizzards engulfing the Midwest and Northeast. And that’s just America—let’s not forget the Japanese tsunami that instigated the Fukushima crisis, the earthquakes that devastated Christchurch, New Zealand, and the famine that afflicted three quarters of Somalians. It’s hard to deny that the Earth is going haywire in a big way. This year has been by far the most expensive with respect to natural disaster damage in history.
The scientific credibility of global warming is solid and has been argued to death, so I will not attempt to refute the corporate-sponsored muckraking campaign aimed at discrediting it. But keep in mind that skeptics of climate change argue that the Earth undergoes natural temperature changes and that humans have nothing to do with any current shifts. If this is indeed a natural epochal shift, the good news is that the Earth will survive. The bad news is that we won’t. Let’s hope that this claim isn’t true, since it would mean that the planet is going to murder our species slowly and there’s nothing we can do about it.
Maybe it’s time we take the hint that a dark storm is brewing. If greenhouse gases are destabilizing natural climate patterns, then it is paramount that we reduce their emission. Joseph E. Aldy and Robert N. Stavins of the Harvard Kennedy School have published a new paper in “The Journal of Environment and Development” reiterating the critical point that the key to reducing carbon emissions needs to be market-based.
Even conservative economists such as Harvard’s own Martin Friedman and N. Gregory Mankiw support a straight-up carbon tax. The logic behind this type of tax, known as a Piguovian tax, is simple: raising the cost of a certain activity so that it accurately reflects its social cost will reduce its frequency to a more socially optimal level. Currently, the private cost of driving a Sports Utility Vehicle does not match the cost of its environmental damage.
Cap-and-trade, regarded as a more politically viable alternative, is a watered down and conciliatory solution that panders to corporations: Revenue raised by the disincentive goes to other corporations rather than to the government itself. But even that plan has become taboo among conservatives: likely nominee Mitt Romney has come under fire in the past few weeks for having policy advisors who so much as consider cap-and-trade.
Conservative opponents to a carbon tax argue that it would be distortionary and would retard economic growth. The tax would in fact be distortionary—that’s the point. But its distortionary effects would be positive, and, since the purpose of the tax is not to raise revenue but to correct a market perversion, the money acquired from it could be used to decrease painful taxation in other areas of the economy.
Critics also argue that, should we impose a carbon tax, we would shoot ourselves in the foot by pushing business to China and other emissions-happy competitors. In reality, China is more progressive than we are with respect to environmental taxation: China’s latest five-year-plan notes the need for a “green tax”, and the tax may see implementation within the next two years. The fact that China—China!—is outpacing us in environmental responsibility while realistic solutions are dead on arrival in our legislature is a national embarrassment.
Yes, there needs to be a global solution to carbon emissions, which means a global tax. Australia, Denmark, and Finland have already implemented carbon taxes, and the European Union, New Zealand, and California have created cap-and-trade systems. But America alone has the power to bring about true, comprehensive change. If we demonstrate that we are serious about reducing emissions via taxation, then others will follow. Climate change legislation, long considered the third pillar in Obama’s domestic reform troika along with health care and finance reform, has been brushed aside due to political realities. Carbon taxes can’t wait, and even Adam Smith would agree that correcting for negative externalities is not a violation of the free market.
Given the price we’ve been paying for ignoring the climate problem—at least $25 billion in this country this year alone—we don’t have time for the political stars to align. Unless we want 2012 to resemble a Hollywood blockbuster in havoc and budget, let’s get this tax passed.
Sam N. Adams ’14, a Crimson editorial writer, is a social studies concentrator in Currier House. His column usually appears on alternate Wednesdays.