Tax My Carbon

William Baldwin, Editor
Forbes Magazine
June 19, 2006

An inconvenient truth, not adequately addressed by Al Gore in his
movie, is that environmentalism makes life complicated. If SUVs are
bad and wind power is good, then we must levy a tax on gas-guzzlers
and hand out tax credits for windmills. Those in the business of
selling windmills are very happy with this arrangement (see story by
Naazneen Karmali), but in no time our fears of global warming have
caused our economy to become littered with subsidies, credits,
deductions, tax surcharges, earmarks and research boondoggles. Here's
a way to make life simpler: Chuck out all energy legislation,
replacing it with a one-sentence statute that levies a tax on carbon
emissions. Let's do it big--30 cents a pound. So that people can
adjust, start it at 1 cent and increment the tax by a penny a year
from now to 2036.

We're talking a lot of revenue--enough, if the full rate were in
place today and no one responded with changes in air-conditioning and
driving habits, to replace the personal income tax. It would add
$1.65 to the price of a gallon of gasoline. It would triple your
electric bill if your utility were entirely coal fired. The purpose,
though, would be not just to raise revenue but to change behavior. In
30 years' time, coal utilities would get very imaginative about
switching to nuclear or finding some way to stuff carbon dioxide down
a well hole. You would have long since retired your Suburban.

Now think of the legislative pollution that could be removed. The
guzzler tax (up to $7,700) could be repealed; it is, after all, none
of the government's business whether I waste gas by driving a big car
or by making unnecessary trips to the pharmacy. Repeal mileage
regulations (27.5 miles per gallon for cars, 21.6 for pickups). Get
rid of the hybrid tax credit (up to $3,400). Forget George Bush's
plan to spend $1.2 billion on hydrogen and $150 million on grass clippings.

We could find other employment for the lobbyists who tell us that
ethanol is a winner; now, for the very first time, the chemical would
succeed or fail on its own carbon merits. We wouldn't need the $2,000
solar credit or the $150 for qualified water heaters or the $50 for
advanced circulating fans. We wouldn't need the tax forms for any of
these things.

What about all those bureaucrats at the Department of Energy working
on renewable energy and energy conservation? They work so very hard,
burning the midnight oil. Think of the oil you could save.

[As for the specifics of the proposal, designed to substitute for a
whole range of policies, taxes and mandates, here's how it has been
explained to us (we may have goten in wrong). Current annual global
CO2 gas emissions are 6 billion tons = 1.7B tons of solid carbon. 30
cents/pound = $600/ton; 1 cent = 20/ton. $20/ton would raise $34B ...
$600/ton at today's volume would raise $1 trillion. Price signals
would start being effective around $50/ton.

A car produces roughly 20 pounds of CO2 per gallon of gasoline. The
fleet average car driven 15,000 miles/year produces 13,000 pounds of
CO2 annually or 3500 pounds of carbon, and at the maximum of $600/ton
that would cost $1,000 in taxes. But price signals would be minimal
in the early years.]