I never thought it would happen, but it looks like a carbon tax might actually become a viable policy option in the U.S.

CO2 tax

In the Washington Post, Juliet Eilperin and Steven Mufson discuss growing support for a tax over a cap-and-trade system. If you read between the lines, it basically breaks down like this: economists and policy wonks prefer a tax, because it would provide a predictable price trajectory and would be less subject to gaming and manipulation.

Legislators, on the other hand, prefer a cap-and-trade system precisely because of its complexity — that complexity will serve to hide price increases from customers. (Make no mistake, though, either option means higher prices for consumers, at least for the foreseeable future.)

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(The outlier from this pattern is green group Environmental Defense, which seems to genuinely prefer cap-and-trade on the merits. You can see their argument in this post or this press release. The fact that they pioneered the sulfur trading system may have something to do with it.)

The politics of this are interesting. As this article describes, carbon taxes are popular on the right as well. One of their biggest champions is Greg Mankiw, late head of George Bush’s Council of Economic Advisors and economics professor at Harvard. Check this out:

Mankiw said he would support carbon and gasoline taxes, even if science proved that global warming was not linked to CO2 emissions, because of the impact such taxes would have on other externalities such as urban congestion and vehicle accident rates.

Mankiw’s also got a blog, where he discusses energy taxes frequently.

So what do we think? Can the combined forces of green wonkery, left wonkery, and right wonkery overcome the forces of risk-averse politickery?

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