Mark Thoma, whose Economist’s View is an excellent resource for all things economic, posts a roundup of writing on cap-and-trade versus a carbon tax, including a good primer on how the economics work and why the two plans are so similar. He also excerpts a rather cynical take by Pete Davis on the political reasons that cap-and-trade is preferred by politicians. Some of the political calculations he cites are no doubt on point, but I disagree with much of the piece. Like this, for starters:
I kid my friends that “I formulated three carbon taxes for Bob Dole back in the early 1980s that are still in his filing cabinet.” I’d be very surprised if the former Senate Finance Chair really kept them, but the fact that they were formulated at all shows that Senate leaders, then as now, were fully aware of of the advantages of a carbon tax …
He goes on to argue that this demonstrates that, strategically, those weaselly politicians don’t like carbon taxes. I think it’s worth pointing out here that climate change science was considerably more debatable back in the early 1980s. I’m sure that if I handed a GOP senator a seemingly random tax proposal today, he probably wouldn’t go rushing off to the floor to introduce it.
Secondly, I think Davis reads the political environment badly when he writes this:
Our political leaders will be watching the public and private reaction to this debate very carefully for signs of what changes they will need to make next year. The primary change will be to water the bill down. No one wants to take credit for raising gas prices by 53 cents and electricity prices by 44 percent by 2030 or to cut GDP by $2.8 trillion by 2050. The path to reduced greenhouse-gas emissions in next year’s bill will be slower than that which is proposed now …
The conventional wisdom among greens and political pundits, I believe, is that Lieberman-Warner represents a floor for future climate bills rather than a ceiling. That this is the case should be obvious for two reasons. First, every month that goes by the science becomes clearer and the tangible impacts of warming become more apparent to a public that’s warming to the idea of climate legislation. Second, Congress is almost certain to be more Democratic next year, and the White House will be more friendly to climate bills whoever the president is (but substantially more so if Obama is the victor). Both Clinton and Obama have proposed climate policies much better and tighter than L-W. And the principal sources of denialism and delay in Congress are currently on the GOP side of the aisle.
Democratic leaders are watching now to see how their opponents plan to fight, so that next year, they’re prepared to use their majority to effectively counter opposition en route to a truly good climate bill.
