I [heart] carbon tax

A strange-bedfellows political coalition, everyone from the CEO of Exxon to climate scientist James Hansen, supports a carbon tax as an alternative to cap-and-trade. Tax proponents allege that cap-and-trade is too complicated; too friendly to financial industry tricks and manipulations; too open to loopholes, cheating, and special pleading; too weak to work.

This is all true. Or rather, could be true, if special interests are given too influential a voice in the process; if there is no organized grassroots movement applying pressure; if the legislators developing the policy allow it to happen.

The thing is, the same flaws could just as easily weaken a carbon tax. Just because it looks elegant sketched on an economist’s whiteboard doesn’t mean a tax can’t be corrupted in the real-world political process. (Have a quick look at the U.S. tax code.)

To boot, taxes of any kind are notoriously unpopular among the U.S. electorate.

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It’s an article of faith among supporters that returning the revenue to taxpayers via rebates could bring public support around behind a tax, despite the fact that just such a refunded tax was roundly rejected in Canada last year. Despite the fact that a comprehensive new survey out of Yale (PDF) asked a representative sample of over 2,000 people what means they favored to fight climate change and a fully refunded gasoline tax came in dead last. Despite the lack of any real empirical evidence that taxes can be rendered popular with promises of rebates.

Pricing carbon will be a fraught political battle, in danger of being corrupted or dying in Congress. That’s true whether it’s cap-and-trade or a carbon tax on the table.

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