Opinion: Column
Carbon tax effective cap and trade alternative
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Climate change legislation is coming. Like it or not, there is sufficient political consensus that global warming needs to be addressed nationally and that — barring some kind of major screw-up by proponents — we will certainly see legislation aimed at substantially reducing carbon emissions this year.
On the national level, President Obama has put a cap-and-trade system into his proposed budget. In the event his proposal doesn’t make it through Congress, Gov. Doyle has been meeting with a group of governors to come up with a regional cap-and-trade system for the
The problem with these efforts lies not in their attempts to reverse the recent trend of accelerating growth of carbon emissions but rather in the idea that a cap-and-trade system is the best solution. A cap-and-trade system is fundamentally a component of a centrally planned economy. While allowing companies to purchase carbon credits at auction — and buy and trade them like stocks — calls to mind some principles of the free market, as long as the government is determining the level of total carbon emissions, it is no more than a concession that government bureaucrats can manage our economy down to the last molecule of carbon dioxide.
Despite that pro-free market forces have lost considerable credibility over the last several months, with very few exceptions, most people just want a more regulated free market system with more government intervention as opposed to a truly centrally planned economy. For example, despite wanting bailouts and increased emissions standards for the auto industry, no one is seriously proposing the government decide how many of each kind of car our automakers ought to produce.
Having a free market-based system, even with heavy government taxation, regulation and intervention is still remarkably different than a fundamentally centrally planned economy. That’s why European-style socialism has enjoyed relative success and provided reasonable economic growth, while Soviet-style communism collapsed and wrecked so many economies. It’s also why, despite having a social safety net that would make many Progressive Dane members giddy and the highest rate of taxation in the world, a country like
Allowing the government to set the “optimal” levels of carbon emissions is no less absurd than allowing them to decide the proper number of cars or computers. There is no possible way for anyone to be able to determine the appropriate total level of carbon emissions for our economy. And given how terrible everyone — including the government and the private sector — has been at predicting the economic consequences of actions recently, can you really trust anyone who claims that proper management of the cap-and-trade system won’t have dramatic economic consequences? That’s one risk I would rather not take.
Letting government officials decide what they believe to be the appropriate levels of carbon emission would have adverse effects if inappropriately determined. If the allowable level of total carbon emissions is set too low, we risk making energy prohibitively expensive and stifling all of our bleak hopes at economic recovery. On the flip side, setting the limit too high would unnecessarily allow emissions to continue at higher levels and render the program ineffective at reducing greenhouse gases.
However, there is a way we can regulate carbon emissions that reflects the proven system of the free market with a touch of government regulation and intervention as opposed to the failed idea of a centrally planned economy. If carbon emissions really need to decreased, the best way to do it would be with a carbon tax. Internalizing the added costs to society of carbon emissions through a tax would avoid the rigid central planning of the cap-and-trade system while still providing substantial encouragement for the reduction of carbon emissions. With a carbon tax, the market would have the flexibility to determine what the optimal level of carbon emissions ought to be given the economic climate.
In a world where government bureaucrats manage the cap-and-trade system perfectly, the cost of acquiring carbon permits would remain relatively stable, enough to encourage us to move away from carbon-based fuels but not high enough to severely hamper economic growth. The two systems function very similarly in how they reduce carbon emissions, therefore, it just makes sense to just eliminate the potential for incorrect decisions by our well-intentioned government officials through a carbon tax. Our economic and environmental futures may depend on it.
Patrick McEwen (mcewen@wisc.edu) is a sophomore majoring in nuclear engineering.
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I couldn’t agree more that a cap and trade scheme like the one President Obama proposed is fundamentally flawed whereas a revenue-neutral carbon tax avoids the pitfalls inherent to C&T, significantly reduces emissions, incentivizes the creation of green technology AND returns the revenue to the people. Hopefully, as more and more economists, scientists and opinion leaders line up in support of a carbon-tax, policy-makers will take note and follow suit. ~Climate Task Force
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Thank you, Pat. Not even the Socialists or Communists employ full-socialism anymore, so it’s absurd for our imaginary “Right” to use the pinko sigma for the Obama administration. (imaginary, i.e. WTF was Bush?)
Tax breaks for desired activities, tax hikes for everything else; it’s the American way.
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More hidden taxes that the ignorant don’t even realize that they pay, what a horrible idea.
So Obama was just going to taxe the rich? Everydody who uses any energy, or buys anything from a company that uses energy, will be paying this tax.
Is the government just sooooooooo good at everything it does that you think we should have them do everything?
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“Having a free market-based system, even with heavy government taxation, regulation and intervention is still remarkably different than a fundamentally centrally planned economy.”
A free-market means no government intervention. We do not have a free market-based system, we have a mix of two opposite systems: freedom and controls. The difference between heavy regulation and complete central planing is one of degree only. Fundamentally both systems reject freedom and individual rights. Both systems consider people to be serfs, it’s just a matter of degree.
“That’s why European-style socialism has enjoyed relative success and provided reasonable economic growth, while Soviet-style communism collapsed and wrecked so many economies.”
The growth is caused by the non-socialist elements. Complete socialism causes complete death. Less socialism causes less death. Just think about what no socialism could do.
“With a carbon tax, the market would have the flexibility to determine what the optimal level of carbon emissions ought to be given the economic climate.”
A carbon tax is not an economic condition, it is a coercive constraint on productivity. There’s no basic difference between prohibiting energy production via regulation and imposing taxes, making such production unprofitable.
People have a right to produce energy and carbon is one of the byproducts of that production. If some producer is demonstrably harming another person, they can be stopped, but this has to be proven. It is not the job of legislators to manipulate behavior through taxation.
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“It is not the job of legislators to manipulate behavior through taxation.”
Where are you from, Mars? Why do we get tax breaks for retirement accounts, health savings accounts, having children, owning houses, starting a business, etc.? Oh, the government likes when we do these things and it benefits the country.
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If you want less of something just tax it.
So why do we tax income?
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“Is the government just sooooooooo good at everything it does that you think we should have them do everything?”
To channel Bill Maher:
You mean like the post office? Where I can mail a letter in California on Wednesday, have it get to New Jersey on Friday, and for 42 cents?
Hell yeah, I’d love it if other companies or my health care system worked that efficiently and cheaply.
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You mean the same post office that is out-performed by FedEx and UPS?
The same one losing money and raising rates all the time?
The one that delivers a ton of junk mail to me?
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Jim,
I don’t really disagree with anything you had to say, you just entirely miss the point of my column. If you believe that climate change legislation aimed at reducing carbon emissions in inevitable, as I do, then nothing you had to say will ultimately matter. While it is certainly worthwhile to continue the ultimately losing battle against such legislation, to preclude yourself from any part of the discussion of that legislation will only serve to further marginalize your views.
I also reject the idea that all forms of government intervention into the economy are equal. A basic understanding of history and economics makes it pretty clear that there are stark differences between a Soviet-style centrally planned economy and the European style welfare state (which is really no more socialist than our own system). Any system that still has uses a rational system of pricing to allow individuals to allocate resources to the most productive sectors of the economy is a significant step above a centrally planned socialist economy even if it involves extensive government intervention and regulation.
Even in situations where there are two alternatives that you fundamentally disagree with, so long as there are meaningful differences between the two, attempting to sway the decision towards the lesser evil isn’t wrong as long as you don’t lose sight of the ultimate goal. Rejecting incremental change just because it isn’t perfect ensures the failure of a political movement.
-Patrick
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Another fine nonsolution to a nonproblem, brought to you by the Church of Man Made Global Warming. Say “Hallelujah” Brother McEwen! Now show your true commitment to the Church and stop exhaling Man Made CO2!
“Send in the Clowns. Don’t bother, they’re here!”