Counterparties: When climate change gets fiscal
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Neither candidate paid much attention to climate change during the presidential election: it wasn’t so much as mentioned in any of the three debates. Then came Superstorm Sandy, Mayor Bloomberg’s climate-motivated endorsement of President Obama, and Businesweek’s mince-no-words cover. There’s also the fiscal cliff (or austerity bomb, if you prefer). What better time to start taxing carbon?
The logic is simple: a carbon tax could raise $1.25 trillion over a decade, and according to Treasury officials, the President could be on board. Even anti-tax crusader Grover Norquist, famous for his pledge to never raise taxes, was open to the idea of a “carbon tax swap” — until the denialist Koch brothers intervened and Norquist hastily reversed his position.
In his first press conference since the election, the President put secondary importance on climate change. Now Brookings’ Barry Rabe says that “enacting a carbon tax to address climate change and fiscal woes may be as plausible as relying on new leadership to steer the Chicago Cubs to their first world championship in over a century”. Ouch.
As Dylan Matthews points out, a carbon tax was never really a fiscal panacea to begin with; according to an MIT study, for instance, it wouldn’t allow income tax rates to come down much. As Mark Thoma writes:
Attempts to insulate various groups from the consequences of the tax…will eat into potential revenue, and the fact that the response to the tax will be greater as more time passes — for example as people switch to more efficient cars and appliances — will also reduce revenue.
Even so, there are reasons to believe a carbon tax could be coming. California now has a functioning cap-and-trade system; it’s never been less profitable to run coal-fired power plants; and climate legislation is still supported by companies from Alcoa to Weyerhaeuser. — Ben Walsh
And on to today’s links:
How long does a lie last? – Scientific American
Healthcare is moving toward pay-for-performance: Behavioral economics suggests it won’t help – Health Affairs
Nate Silver answers the most burning post-election questions – Deadspin