Posted by Jonathan Adler:
Mankiw's Case for a Carbon Tax:
http://volokh.com/archives/archive_2007_09_16-2007_09_22.shtml#1190253598
On Sunday, economist Gregory Mankiw wrote [1]a piece in the New York
Times making the case for a "carbon tax." Among other things, Mankiw
discusses how a carbon tax could be adopted without imposing
regressive tax burdens.
[The] natural aversion to carbon taxes can be overcome if the
revenue from the tax is used to reduce other taxes. By itself, a
carbon tax would raise the tax burden on anyone who drives a car or
uses electricity produced with fossil fuels, which means just about
everybody. Some might fear this would be particularly hard on the
poor and middle class.
But Gilbert Metcalf, a professor of economics at Tufts, has shown
how revenue from a carbon tax could be used to reduce payroll taxes
in a way that would leave the distribution of total tax burden
approximately unchanged. He proposes a tax of $15 per metric ton of
carbon dioxide, together with a rebate of the federal payroll tax
on the first $3,660 of earnings for each worker.
Mankiw also explains why a carbon tax is preferable to various energy
conservation regulations, such as automobile fuel economy standards.
Enhancing fuel efficiency by itself is not the best way to reduce
energy consumption. Fuel use depends not only on the efficiency of
the car fleet but also on the daily decisions that people make �
how far from work they choose to live and how often they carpool or
use public transportation.
A carbon tax would provide incentives for people to use less fuel
in a multitude of ways. By contrast, merely having more efficient
cars encourages more driving. Increased driving not only produces
more carbon, but also exacerbates other problems, like accidents
and road congestion.
Mankiw also explains why a carbon tax would be preferable to an
equivalent cap-and-trade regime. In addition to the points Mankiw
raises, I [2]have argued that a cap-and-trade scheme is likely to
result in greater corporate rent-seeking.
References
1.
http://www.nytimes.com/2007/09/16/business/16view.html?ex=1347595200&en=c01f67013fa7eb6e&ei=5088&partner=rssnyt&emc=rss
2. http://www.volokh.com/posts/1177606109.shtml
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