“The Key Role of Conservatives in Taxing Carbon”

Carbon
Julia Yellow

Economist N. Gregory Mankiw presents a compelling and succinct case for conservatives leading market based climate change through the carbon tax in a recent posting in the New York Times.

As Mankiw states in the article, “It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.”

At this juncture, conservatives and libertarians should think of government responses to climate change as a binary choice – either opt for the inevitable heavy-handed and likely ineffective machinations of government agencies that are riddled with cronyist handouts and contradictions, or put a price on a substance that is in having an environmental impact to drive market-based incentives to change behavior and let private industry innovate around the new landscape. The role conservatives can play is to ensure that moves in this direction are consistent with limiting the role of government and making sure that carbon taxes are offset with tax reductions elsewhere. Otherwise, we will be left with a double penalty of more taxes and a higher burden of regulations.

A carbon tax would be at least neutral or perhaps much less economically malicious than taxes on income, investments, consumption, or taxes on production (corporate taxes). Conservatives could propose a compromise approach to climate change in which carbon taxes are offset by reductions in the aforementioned tax types that would likely pass into law.

It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.

Indeed, a simple carbon tax is, as quoted in the article, “a solution that is consistent with free enterprise and limited government.” This rings particularly true when compared to the current arbitrary rule by diktat patchwork that is the EPA.

Institutions and Experience (plus some Carbon Tax thoughts)

Magna Carta

I always enjoy John Cochrane’s writings, and the notes from his speech recently at the Hoover Institute are remarkable for bringing to light the importance of venerating our institutions that uphold individual liberties, ideals, and the rule of law. It is well worth the read and includes a lot of concepts that are not talked about or defended enough, especially by our presidential candidates.

As Cochrane is an economist that is considered quite libertarian, I appreciated his discourse on implementing a carbon tax:

I see hope on climate. There is a small but increasing alliance between environmentalists and free-marketers. The environmentalists think carbon is such a big problem, that they want policies that will actually do something about it. Free marketers are aghast at the waste and cronyism of energy policy. They are coming together on a deal: A simple straightforward carbon tax in place of wasting money and economic capacity on tax dodges, crony subsidies and ineffective regulations. Sure, there will be a big discussion on the rate, but any conceivable rate will be a big improvement for both environment and economy.

This may be anathema to many libertarians and conservatives, but I hope to see the discussion on the carbon tax grow. I wonder if that day will ever come. I think there are many climate change skeptics that will balk at the carbon tax simply on principle. I consider myself not so much as a climate change skeptic as much as I consider myself a skeptic that the throngs of self-appointed science doyens that have seemingly descended into a colossal mob mentality group-think aligned with cynical politicians happy to use the fear-mongering to shower subsidies on their pet projects will have any discernable impact while wasting trillions of dollars along the way. Far better that if we agree that there is some risk of manmade climate change, no matter how far into to “black swan” tail end of the probability curve it is, it would be far better to implement the carbon tax and offset other forms of taxation to make it politically palatable. Then the market will adjust to the activities in innovative and efficient ways. The cronyist ways in which we allow the government to pick and choose winners and to create arbitrary and unaccountable legislation through the EPA is the current alternative – and this undermines liberty and the rule of law far more than a simple and understandable and navigable carbon tax.