Prices Matter – Page 23

Carbon Tax Center

Pricing carbon efficiently and equitably

The Obama Climate Proposal — A Giant Step Forward

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The Carbon Tax Center applauds President Obama’s proposal to cap emissions, use market forces to reduce emissions, and return revenues through payroll tax credits. The proposal, as outlined this week, is a huge step forward from the Lieberman-Warner pork-barrel cap-and-trade fiasco last year and moves the discussion closer to the “gold standard” of a revenue-neutral carbon tax. We hope other carbon tax advocates join us in building upon the proposal; blanket opposition would be counter-productive to our common goal of reducing greenhouse gas emissions. 

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How do we build upon the President’s initiative? We believe carbon tax advocates should:

  • Agree with the need to cap emissions, but advocate implementing the cap through a cap-and-tax rather than a cap-and-trade program.  We need to recognize and endorse the political value of a "cap" and recommend that any carbon tax include specific emission reduction goals to be implemented through periodic adjustments to the carbon tax rate.  
  • Agree with the concept of using market forces to reduce emissions, but continue to argue that carbon taxes are simpler, more transparent and efficient than trading.  Carbon taxes will provide a powerful price signal promoting more efficient use of energy and the substitution of renewable energy for high-carbon fossil fuels. 
  • Agree with the general concept of returning revenues through payroll tax credits, but suggest improvements such as ensuring that lower-income families are adequately protected and returning all or a far larger percentage of the revenues through payroll tax reductions or dividends.
  • Continue to stress the importance of imposing a tax, or obligation to obtain permits, upstream in order to reduce administrative complexity and ensure comprehensiveness.
  • Recognize that a well-designed and implemented cap-and-auction program, one that is as close to a carbon tax as possible, is far better than nothing and would also be better than a poorly designed and implemented carbon tax. We should not hesitate to point out the superiority of carbon taxes, but not in ways that might aid those who want to delay effective action on climate change.

We support a well-designed carbon tax because it is the most efficient, equitable and certain means to reduce greenhouse gas emissions significantly— and soon. Our future demands that we advocate for nothing less.

Photo: Flickr / Annie Oakley.