Carbon Tax, Not Cap-and-Trade, Best Way to Combat Global Warming: Economist William Nordhaus


photo: Martha Soukup/Creative Commons

By many accounts it may be politically a non-starter right now in the United States, but nevertheless implementing a carbon tax is the best way to rein in rising carbon emissions and combat climate change. That's the word of Yale University economist William Nordhaus, writing in a new article in the Bulletin of Atomic Scientists. But that's not all: Nordhaus argues that not only is a carbon tax superior to an international cap-and-trade scheme, such an emission trading scheme, as currently conceived, is "both economically inefficient and ineffective."Nordhaus points out, "Countries have used taxes for centuries, by contrast there is no experience, as in zero, with international cap-and-trade systems."

Summing up Nordhaus' reasoning on the superiority of a carbon tax and why it could get the near-stalled international climate talks moving forward more quickly:

A carbon tax model also provides a friendly way for countries to join a climate treaty. Countries considering joining under the current Kyoto model have to weigh up concerns about the long-term impacts of climate change with heavy pressures that big countries could apply. Under the carbon tax model, by contrast, countries would need only to guarantee that their domestic carbon price would be at least at the level of the international norm -- a relatively straightforward and transparent choice. (Science Daily)

In addition to the straightforward and comparatively transparent nature of a carbon tax scheme versus cap-and-trade, Nordhaus also says a carbon tax would be an important revenue source for closing growing budget deficits in high-income countries. Furthermore, "the international community should move quickly to replace current cap-and-trade structure by one in which the central economic mechanism is a tax on greenhouse gas emissions."

How to Overcome Ideological Opposition to Taxes in US?
I've long thought that a straight carbon tax is superior to cap-and-trade as a solution to pricing carbon and limiting the effects of climate change. And living in the United States and being a public member of the environmentalist community I often feel like I'm in the minority in continuing to advocate for it, even when the very word 'tax' sends many people here into near apoplectic fits even before the final 'cks' sound is uttered--and as soon as people get told cap-and-trade is a 'market-based solution' they nearly rise to ideological orgasm.

The central question then remains: How can we overcome the deeply ingrained ideological opposition to the very concept of tax in the United States? How can we convey the notion that while some sing the praises of cap-and-trade because it's somehow more market-based than carbon tax, the latter is also solidly market-based in that it is designed directly to correct a market failure and enable that beloved sacred marketplace to function more efficiently?

And how can we overcome stubbornly practical opposition within the environmental community that argues for cap-and-trade seemingly solely because, to paraphrase an oft-heard sentiment, "it's the best thing we've got right now"?

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More on Carbon Taxes:
Not Waiting For the Feds, Carbon Tax Enacted by Montgomery County, Maryland
Obama Should Implement Carbon Tax, Eminent Climatologist Says
Sarkozy Backs Down, France's Carbon Tax Plan is Stillborn

Tags: Economics | Global Climate Change | Global Warming Solutions

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