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Monday, April 21, 2008

Carbon tax bargain

Virginia Postrel writes that "There's No Such Thing as a Free Carbon Cap":
It's infuriating how all three presidential candidates prattle on about the need to fight global warming while also complaining about the high price of gasoline. The candidates treat CO2 emissions as a social issue like gay marriage, with no economic ramifications. In the real world, barring a massive buildup of nuclear plants, reducing carbon dioxide emissions means consuming less energy and that means raising prices a lot, either directly with a tax or indirectly with a cap-and-trade permitting system. (Alternatively, the government could just ration energy, but fortunately we aren't going in that direction.) The last thing you'd want to do is reduce gas taxes during the summer, as John McCain has proposed. That would just encourage people to burn more gas on extra vacation trips--as any straight talker would admit.
Agreed. However, if a carbon tax is (partly) compensated by tax cuts elsewhere, and spurs technological developments that could help lower energy prices over time, then although not free it would still be something of a bargain.

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