01 June 2007

The carbon debate continues, but not here

Yesterday Marginal Revolution stepped into the current battle over carbon tax vs. carbon trading. It's tempting to get involved in comparisons here, but I tend to agree with one of the MR commenters: Americans have always been bad at doing things that are 'good for us' when they also interfere with our expected standard of living. The EU modeled its brand-new cap-and-trade program on the US program for limiting sulfur dioxide emissions, which worked okay, but mostly because it didn't have an immediate pocketbook impact on consumers (average utilities increase was about 1%). Carbon taxes and carbon trading, regardless of differences in feasibility, transparency, and potential for abuse, would both result in an immediate out-of-pocket expense. It’s challenging to calculate the economic impact of carbon cap-and-trade systems, which have only recently been implemented in other countries. Carbon taxes, on the other hand, have been in place in various European countries since the 1990’s, so some figures about that: The Carbon Tax Center advocates a ‘starter tax’ of $37/ton of CO2, and notes the importance of continuing to raise the tax annually. According to preliminary research on Wiki, a tax of $100 per ton of CO2 would raise US gasoline prices by 20-50%, natural gas prices by 60-150%. Politically, that dog just don't hunt.

At least, usually. Last year Boulder passed by referendum a $7/ton carbon tax; it was the first climate-protective tax ever in the US. By extension, I’m willing to entertain the idea of carbon taxing or trading schemes being implemented in California, Oregon and Washington someday, but doubt that these bastions of environmental consciousness are representative of the American electorate generally. Soon to come: a post about politically realistic ways to solve the carbon problem.

2 comments:

Frank said...

The numbers I've read put a $100/ton tax impact on gasoline at a little under 30 cents per gallon, and in theory that's a fixed increase, not a percentage. Maybe your numbers are old and/or on the pre-tax price of gas.

I agree that even that is unlikely to fly until someone successfully communicates to the electorate that the only one that can do anything about their fuel bill is they themselves; that neither the government nor the oil companies are going to lower the price of gasoline any more than gold mining companies can lower the cost of gold.

LP said...

Frank,

I pulled my numbers off wiki, so I won't claim that they represent the most sophisticated analysis around. (Wiki, in turn, cites the Energy Information Administration for those numbers, which is run by the US gov on the basis of voluntary greenhouse gas reporting.)