nuclear-news

It’s time now for a tax on carbon

Why Now Is the Right Time for a Carbon Tax http://blogs.wsj.com/experts/2015/04/02/why-now-is-the-right-time-for-a-carbon-tax/ MARGARET WALLS: The current downturn in the oil and gas business, like the ups and downs of the cycles that came before it, is fundamentally a result of demand and supply. Weak economic activity in Europe, China and elsewhere has led to reduced demand at the same time that increased exploration and development, particularly from U.S. unconventional sources, has increased supply.

The low prices are creating winners and losers in the U.S., but the biggest loser may be the environment. As consumption of gasoline, diesel, jet fuel and other refined petroleum products rises in response to lower prices (and it will, mark my words), emissions of carbon dioxide and other greenhouse gases will rise, too, exacerbating the already dire projections for global climate change. The time couldn’t be better for implementing a carbon tax.

The timing is right for two important reasons. For one thing, low oil prices will dampen the blow. A tax of $25 a ton of CO2 would raise gasoline prices by about 25 cents a gallon, keeping pump prices still far below where they were a year ago. For another, a carbon tax might help to avert some capital investment decisions that would lock in higher emissions. Many observers are worried that low oil prices may lead households to increase purchases of SUVs and other gas guzzlers, cause manufacturers to back off from conversions of oil-fired boilers, and dampen plans for a variety of renewable-energy investments. A carbon tax would provide the right consumption and investment incentives.

As former Treasury Secretary Larry Summers put it in advocating for a carbon tax, “that which is not paid for is overused.” We pay a price for energy but that price reflects only its private costs and benefits and not the externalities associated with its use, the most serious of which is climate change. The call for a carbon tax is now coming from many quarters.

Former Secretary of State George Shultz has made an impassioned plea for a revenue-neutral carbon tax, an option many economists have supported for years. Coupling a carbon tax with reduced income or payroll taxes can improve the environment and the tax code. A lump sum per household annual “climate dividend” is another option.

Congress is gridlocked but a revenue-neutral carbon tax should have appeal to both political parties. And with oil prices at a five-year low, no time could be better.

Margaret Walls (@margaretwalls1) is research director and senior fellow at Resources for the Future, an independent nonprofit research organization in Washington, DC. 

Read the latest Energy Report.

April 4, 2015 - Posted by Christina Macpherson | climate change, USA