Carbon tax would hurt the economy

Published 6:55 pm Friday, January 9, 2015

 

There’s a danger in the recent drop in oil prices — a drop everyone knows is temporary — that’s just starting to emerge. Those who want to impose a “carbon tax” see the relief that all Americans are feeling at the gas pumps as a way in.

Former U.S. Treasury Secretary Lawrence Summers is one of those carbon tax advocates.



“The case for carbon taxes has long been compelling,” he writes in the Financial Times. “With the recent steep fall in oil prices and associated declines in other energy prices it is overwhelming. There is room for debate about the size of the tax and about how the proceeds should be deployed. But there should be no doubt that starting from the current zero tax rate on carbon, increased taxation would be desirable.”

The “case” for carbon taxes is based on two premises. First, that carbon emissions are substantially leading to measurable climate change; second, that a carbon tax would decrease those emissions.

Setting aside the first premise (and the complete lack of warming for the last few years, which even the New York Times acknowledges), the second premise is shaky.

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Will a carbon tax really decrease emissions? Certainly not worldwide. Such a tax might have an effect in the United States, where consumers will pay more for not just fuel and electricity, but for everything that requires power to produce (hint: that’s everything).

But we know that any decrease in emissions in the U.S., resulting from the decrease in economic activity that higher prices will force, will be offset by developing nations — particularly China.

That’s not the opinion of climate change “deniers.” That’s the assurance made by Secretary of State John Kerry.

“Even if every single American biked to work or carpooled to school or used only solar panels to power their homes — if we reduced our emissions to zero, if we planted each of us in America a dozen trees, if we somehow eliminated all of our domestic greenhouse gas emissions, guess what?” he said in November. “That still wouldn’t be enough to counteract the carbon pollution coming from China and the rest of the world.”

So there’s no gain, but lots of pain. And Summers acknowledges this.

“There has always been the concern that raising carbon taxes would place an unfair burden on some middle- and low-income consumers,” he writes. “Those who drive long distances to work, say, or who have homes that are expensive to heat would be disproportionately burdened. Now these groups have received a windfall from the drop in energy prices so it would be possible to impose substantial carbon taxes without them being burdened relative to where prices stood six months ago.”

In other words, we can slip this carbon tax through, and for now, while oil prices are low, those middle- and lower-income Americans won’t even notice.

That’s simply dishonest. We all know that eventually, gas prices will go back up. And when they do, the middle- and lower-income Americans will bear the burden of this bootless policy blunder.