A carbon tax would provide incentives for consumers and businesses to avoid it, which...
Kolton Cox skateboards at Unidad Park near the ExxonMobil facility in Baytown, TX, Thursday, Nov. 12, 2020.Ninety years ago, journalist William G. Shepherd wrote in Collier’s Weekly, “Congress! Congress! Don’t tax me, tax that fellow behind the tree.” In the 1970s, Russell Long, chairman of the Senate Finance Committee, updated the phrase to say, “Don’t tax you, don’t tax me, tax that fellow behind the tree,” but the feeling remained unchanged — as it does today.
Then, the question is what to tax. The answer is as simple as the reasons no one likes taxes: something that causes the least — or best — distortion. As a former investment banker, I know markets are powerful. Our economy, as well as economies around the globe, emit more carbon emissions than they would if the social cost of carbon were reflected in the production and consumption of goods and services. Unfortunately, we are not made aware of that personal cost, though we know it is not zero.
Unlike a draconian policy to ban the use of coal or outlaw carbon-intensive fuels, a carbon tax will create an economy-wide incentive for consumers and businesses to adopt low-carbon sources of energy. Equally important, it will drive innovation, resulting in new low-carbon technologies that will be critical to lowering emissions here and abroad.
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