This desired effect, however, is exactly what makes these kinds of taxes politically unfeasible, at least in America.
Sadly true. The other factor is that conservatives won't like them because they're taxes, and liberals won't like them because they're market-based. ("Rich people shouldn't be able to pay to pollute").
I don't know any liberals that don't like carbon taxes or cap and trade regimes because they're market based. I mean, the EPA already runs a cap and trade system for some pollutants. I'd say the bigger issue is that there are some states represented by both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that.
I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes, and they definitely prefer higher fuel economy standards to gas taxes.
both liberal and conservative politicians that will lose under a cap and trade regime, and those politicians are going to oppose any carbon price because of that.
I probably overstated it, but it does seem that the left prefers cap-and-trade to carbon taxes
This confuses me. I thought you were arguing that liberals dislike cap and trade regimes because they're market based, but now you seem to suggest that they prefer cap and trade regimes to carbon taxes. What am I missing?
I think lefty think tanks and environmental groups do prefer
cap and trade to carbon taxes but only because of implementation issues. They seem to think that more tinkering around with the tax code will not be helpful and that a cap and trade regime will have an easier time getting through Congress without getting gutted and sullied by unsavory deals than a carbon tax would. Plus, politically, calling anything a tax is a killer. And that includes policies that are revenue neutral. So they've basically decided that a crummy cap and trade regime that passes Congress is better than a good carbon tax that has no chance of getting passed.
Economists generally view carbon taxes and cap and trade regimes as equivalent; there are differences but they boil down to implementation practicalities. Its like arguing over whether you should use CPython or Jython; they're mostly the same and the answer depends on a lot of gritty technical details about your deployment environment, etc.
and they definitely prefer higher fuel economy standards to gas taxes.
I think this reflects a belief that raising the gas tax is political suicide and completely impossible. At least, that's the sense I get from reading lefty environmental wonks.
A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond. Cap and trade involves setting a limit by fiat and allocating the initial permits. Some on the left see those attributes as features, because they get to pretend to control total emissions, and help "deserving" companies. In reality I expect cap and trade would be corrupted by rent seekers to a far greater extent than a carbon tax would be.
Economists generally view carbon taxes and cap and trade regimes as equivalent
I think this reflects a belief that raising the gas tax is political suicide and completely impossible.
Could be. From the conservative wonks I read there's a surprising amount of support for a higher gas tax, but you're right that it would be a hard sell to the public, compared to regulations where the costs are much easier to hide.
A carbon tax is more free market, because it just puts a price on the externality and lets the market decide how to respond.
Ryan Avent, an economist who focuses on these issues and writes for the, um, Economist, claims that there are no significant differences between the two policies: http://www.ryanavent.com/blog/?p=2011 I haven't heard your explanation before though, so do you have any experts who support this claim?
I agree with Greg Mankiw that cap and trade equals carbon tax plus corporate welfare:
Um, do you really think that the US tax code is generally free from corporate welfare giveaways? If you don't, then why exactly do you think that we could pass a carbon tax that would not have corporate welfare exemptions included? Do you think that corporate lobbyists are particularly powerless when it comes to changing the tax code?
It seems that giving away permits initially is superior to including an exemption in tax law. The giveaway is a one time cost; but exemptions live forever.
Beyond that, I agree with conservative economists Tyler Cowen and Alex Tabarrok that Mankiew's analysis is naive and incomplete: http://www.marginalrevolution.com/marginalrevolution/2009/05... ; that might be true for the ideal carbon tax with no exemptions for anyone that everyone agrees could never pass Congress. But there seems to be no point comparing a realistic cap and trade bill against an impossible to pass carbon tax.
From the conservative wonks I read there's a surprising amount of support for a higher gas tax
Interesting. I'd be curious which conservative wonks support a gas tax increase.
Sadly true. The other factor is that conservatives won't like them because they're taxes, and liberals won't like them because they're market-based. ("Rich people shouldn't be able to pay to pollute").