The Case Against a Carbon Tax
By Jordan McGillis
Institute for Energy Research
WASHINGTON, DC (April 2019) – In early 2019 the Congressional Progressive Caucus has sought to shift the Overton window for energy and environmental policy. February’s resolution “recognizing the duty of the Federal Government to create a Green New Deal” communicates a consistent, if nebulous, view: government must dictate our energy choices to us, lest we careen toward environmental disaster. Short on specific mechanisms, the Green New Deal is not so much a concrete policy proposal, but rather a repudiation of capitalism as such. In response, various conservatives, libertarians, Republicans, and others who tend to support a free-market economic system have groped for an answer of their own to the climate change question. While some are proposing subsidizing their pet technologies, others—the more intellectually ambitious—are coalescing around the carbon tax.
Unlike support for the Green New Deal, support for a carbon tax does not necessarily arise from categorical opposition to capitalism, but often arises from a concern that the burning of coal, oil, and natural gas—despite the benefits—in some way jeopardizes our future. With its mimicking of a price system, the carbon tax offers a less flagrant, more sophisticated means of economic intervention than the Green New Deal’s command-and-control approach. Some carbon tax proponents go so far as to claim that a carbon tax is a means of “unleash(ing) the power of our free enterprise system.” This optimism is unfounded. Carbon taxes are nonobjective, they are coercive, and they are impediments to prosperity. As this paper will make clear, the carbon tax lacks merit as a public policy.
This paper comprises six core points against the carbon tax:
- Carbon taxes are set arbitrarily.
- The climate change mitigation goals of the world’s leading political bodies are at odds with the climate economics literature.
- A U.S. tax-and-rebate plan would slow economic growth.
- Carbon taxes have unexpected, adverse tax effects.
- A U.S. carbon tax would be irrelevant.
- A U.S. carbon tax that would replace existing regulations and/or taxes is not politically viable.