Noah Smith has a really good post about the problems with carbon taxes. I want to raise two more. The first involves a slight disagreement with Noah, who writes:
1. Carbon taxes are politically infeasible in the U.S. A few people have tried to introduce carbon tax bills. There has been essentially no interest. This may be because there is no concentrated special-interest constituency for carbon taxes (the Pigou Club notwithstanding), or because politicians instinctively realize the existence of some of the other reasons I’m going to cite. Also note that the more well-known, Obama-supported “cap-and-trade” idea also went nowhere fast.
I cited this reason first because it’s the weakest; political infeasibility should not stop economists and other intellectuals from recommending the right policy.
Where I disagree with Noah is that I think this is bad policy for the same reason I’m not enamored of gas taxes–they hammer lower-income people. There’s a reason these bills go nowhere. Either a carbon tax will be small enough to only affect the desperate–which is still shitty policy–in which case it will do very little to discourage consumption, or a carbon tax will be steep enough to affect middle class and upper middle class people, in which case lower-income people will be obliterated. Notice that I refer to lower income people. The poor and the elderly get some assistance (although austerians are doing their damnedest to kill that. TEH SOCIALISMZ!!! AAIIEE!!!), but it’s the lower-middle that gets left in the lurch. And they don’t have a lot left to give. Essentially, a carbon tax is an ‘oxygen tax’–there’s no way to avoid it. People living close to the bone are already doing everything they can to lower energy consumption, although many things are beyond their control: renters can’t make energy efficient upgrades because they don’t own the property (an aside: about one third of U.S. energy use is residential; a carbon tax that doesn’t deal with this isn’t very useful).
But there’s another thing that bothers me, which is that what passes for the left has essentially adopted a gliberatarian ‘nudging’ strategy. If you even utter the word regulation, people will often raise the ‘command and control’ shibboleth. But that’s stupid. If you really think that global warming is a serious problem–and the U.S. military calls it a national security threat–then command and control is the way to go. Just ban any power generation process that generates too much carbon per joule. If the problem of global warming rises to the environmental equivalent of war (and since the U.S. blows shit up at the drop of a hat, what issue doesn’t?), government dictat works just fine in emergency situations (e.g., World War II). Besides, there are a limited number of technologies we’re dealing with here. Any new technology should be cleaner. And regulation in this case is really easy and hard to circumvent: it’s not like someone can cover a coal-burning power plant with a couple of branches to hide it from aerial surveillance.
Rather than building a Rube Goldberg contraption, just use regulation to limit carbon emissions. Even if that offends some ‘free market’ sensibilities.