On the other side of the ledger, there has always been the concern that a carbon tax would place an unfair burden on some middle- and low-income consumers. Those who drive long distances to work, say, or who have homes that are expensive to heat would be disproportionately burdened. Now that these consumers have received a windfall from the fall in energy prices, it would be possible to impose substantial carbon taxes without them being burdened relative to where things stood six months ago. The price of gasoline has fallen by more than a dollar. A $25-a-ton tax on carbon that would raise far more than $1 trillion over the next decade would lift gasoline prices by only about 25 cents.
Some worry that taxing fossil fuels will hurt the competitiveness of U.S. industry and encourage offshoring. In fact, a well-designed tax would be levied on the carbon content of all imports coming from countries that did not impose their own carbon levies. The United States can make the case that such a tax is compatible with World Trade Organization rules. Such an approach would have the virtue of encouraging countries who wished to avoid the U.S. tax to impose carbon taxes of their own, thereby further supporting efforts to reduce global climate change.
A U.S. carbon tax would contribute to efforts to combat climate change in other ways. It would be a hugely important symbolic step ahead of the global climate summit in Paris late this year. It would shift the debate toward harmonized measures to raise the price of carbon use and away from the complex cap-and-trade-type systems that have proved more difficult to operate than expected in the European Union and elsewhere.
Join the conversation as a VIP Member