The Next President Has An Opportunity To Implement A Carbon Tax on Energy

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TN Note: Carbon tax is a precursor to energy currency, and it is a program loved by conservatives as much as liberals. Ted Cruz and Donald Trump have made public statements against carbon tax and cap and trade. 

Ronald Reagan, Bill Clinton and George W. Bush all achieved significant tax reform in their first years. While a president may ultimately have more than one bite at the tax apple, it is clear that a new chief executive gets a pretty big bite in the first year.

Perhaps the greatest two determinants of what and how much a president can accomplish are the party composition of each house of Congress and whether the president chooses to make tax reform a priority, particularly during the campaign. But regardless of party – and even of the makeup of Congress – the next president has an opportunity to do something truly dramatic: implement a carbon tax.

While this seems counterintuitive, given that most Republican candidates have not shown interest in the greenhouse gas policies often associated with a carbon tax, doing so makes good economic and political sense and has the support of a great number of economists, both liberal and conservative. A carbon tax would charge for carbon pollution, thus raising revenue and allowing for a combination of long-term debt reduction and cuts to taxes on personal income and corporate profits.

The discovery and exploitation of natural resources by humans gave rise to the advanced civilization in which we live today. Coal, petroleum and natural gas fueled industrialization, raising living standards and life expectancy for most. Energy use continues to fuel economic growth and development today. But along with the benefits of energy consumption come substantial societal costs – including those associated with air and water pollution, road congestion and climate change. Many of these costs are not directly borne by the businesses and individuals that use fossil fuels, and are thus ignored when energy production and consumption choices are made. As a result, there is too much consumption and production of fossil fuels.

Greenhouse gas emissions create a series of problems for the economy and the environment.The Intergovernmental Panel on Climate Change said that emissions, if left unchecked, would increase “the likelihood of severe, pervasive, and irreversible impacts for people and ecosystems.”

Economists have long recommended specific taxes on fossil-fuel energy sources as a way to address these problems. The basic rationale for a carbon tax is that it makes good economic sense: Unlike most taxes, carbon taxation can correct a market failure and make the economy more efficient. “Among economists, the issue is largely a no-brainer ,” wrote former Bush economic adviser Greg Mankiw in 2013.

To be clear, a “carbon tax” should address all greenhouse emissions to the extent that they are attributable to an identifiable party. Carbon dioxide accounts for the vast share of emissions in the United States, but other emissions of other gases – for example, methane and nitrous oxide – are more potent and would need to be taxed under separate schedules.

Carbon taxes would contribute to a cleaner, healthier environment and better environmental and energy policy by providing price signals to those who pollute. A Tufts University study estimates that a $15 per ton tax on CO2 emissions that rises over time would reduce greenhouse gas emissions by 14 percent, while a study by the National Renewable Energy Laboratory estimates that the European countries’ carbon taxes have already had a significant effect on emissions reductions, up to 15 percent. The University of Ottawa found that the carbon tax implemented in Canada’s British Columbia led to a 10 percent reduction in greenhouse gas emissions in the province, compared to less than 5 percent for the rest of the country, where comprehensive carbon taxes were not applied.

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