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Wednesday, March 5, 2008

Carbon tax posterity

The following is "clearly true" only if you view a carbon tax in isolation from the tax cuts made possible by the carbon-tax revenues:
While many environmentalists focus on mitigation (cutting greenhouse gas emissions), many of the economists who spoke at the conference argued that adaptation through wealth creation is the better strategy. Policies aimed at reducing energy consumption to mitigate man-made global warming would likely result in a poorer, less technologically adept future in which future generations would be less able to address the problems caused by climate change. This is clearly true and as a reluctant proponent of a carbon tax, I am painfully aware of this trade-off.
As John Locke Foundation economist Roy Cordato explained: "A higher tax today means lower production and output of goods and services tomorrow, making future generations materially worse off. In setting a carbon tax you must show that future generations would value the problems solved by reduced global warming more than they would value the goods and services that were foregone." He argued it's not possible to know the preferences of future generations, but providing them with more wealth and better technologies will give them more options to express whatever preferences they have.
How about providing them with more wealth and better technologies by cutting taxes on capital gains, dividends, etc., while taxing carbon?

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