Convenient Truth

Jonathan Rausch makes the obvious point that a carbon tax is the best way to deal with global warming and has good side effects:

Just as conveniently, the most efficient way to get started is also the simplest, albeit not the easiest politically: tax carbon emissions. "At around $30 per ton of CO2 over a 25-year horizon, experts seem to think this is the kind of price that will encourage the kind of technologies that are necessary," says Billy Pizer, an environmental economist at Resources for the Future, a Washington think tank. That would translate into an additional 27 cents or so on a gallon of gasoline and about a 20 percent increase in residential electricity bills (more like 34 percent for industrial users). Unpleasant, but hardly radical. Perfectly do-able, in fact.

Fortuitously, a carbon tax could also reduce the U.S. budget deficit and the geopolitical leverage of sinister "petrocracies" such as Iran, Russia, and Venezuela. Policy prescriptions don't come any more convenient than that.

Taxation six plus times more efficient than regulation

Econbrowser on CAFE standards:

Overall, Jacobsen estimates that a one-mile-per-gallon increase in the required average corporate fuel efficiency would increase the average fuel-efficiency of all new cars sold by 2.5%. However, since most of the older cars would still be on the road, Jacobsen estimates that during the first year, total U.S. gasoline consumption would decline by only 0.8%. He estimates the costs of this 1 mpg tightening of CAFE would be $20 billion in the first year, with these first-year costs shared about equally between U.S. consumers and producers. For comparison, Jacobsen claims that a gasoline tax could accomplish the same first-year effect at an efficiency cost of significantly less than $1 billion.

Over time, the fuel savings from tightening CAFE would of course increase, but even after 10 years, Jacobsen concludes that that a gasoline tax could accomplish the same thing at 1/6 the cost.

That's not even including that gas taxes produce revenue which can be used to reduce horribly inefficient taxes on labor and capital.

For the n'th time Kitchen Linker says Pigou means less planning, more growth, a cleaner environment, nor that OPEC pays part of any gas tax.

Tax Saudi Arabia, Iran, and Venezuela

A hefty gas tax would initially be paid by American drivers. But as Americans became more fuel efficient as a result of the tax, the tax would be paid by oil producers. Read about tax incidence.

So the U.S. can replace taxes on goods with taxes on bads, save the environment, and make American foreign policy enemies pay the tax!

Kitchen Linker asks: Why are we not doing this already!?

Pigou manifesto great but too low, too slow and a tax increase

Greg Mankiw in the Wall Street Journal.

Kitchen Linker says:

1) $1/gallon over 10 years is too low and too slow

2) It needs to be revenue neutral, as Al Gore has proposed.

But the manifesto is excellent. Seven reasons you should support this. Call your politico and tell them. Maybe interrupt their lewd IM convo if necessary.

Tax waste not capital

Tyler Cowen in US News and World Report:

Phase out all forms of capital income taxation, including the corporate income tax, and replace them with a carbon tax, including a gasoline tax. "Savings and investment boost economic growth, but when it comes to energy, global warming threatens as a major problem and our dependence on Middle Eastern oil damages our foreign policy."

Kitchen Linker prefers Al Gore's proposal to tax waste not work but either or a combination is critical.