frankschmitt.org:

I’ve been dismayed lately to read about all of the pet-project pork surrounding corn ethanol as a fuel. Congress and the president like it because it’s politically popular in farm states. Automakers like it because on the one hand it doesn’t require any engineering effort, and on the other hand it artificially inflates their CAFE numbers*. And the public likes it because it gives them a warm, fuzzy sense that someone is doing something about global warming and our “oil addiction.”

The problem, of course, is that it doesn’t really do anything, short of raising food prices and “burning the last six inches of midwest topsoil in our cars”: The improvement from a CO₂ and energy perspective is somewhere between next-to-nothing and worse-than-nothing. Yet the corn ethanol industry receives bigger subsidies every year.

So the question is how can we curb carbon emissions without encouraging wasteful subsidies for feel-good non-solutions like ethanol and hydrogen? And how can we make it politically possible?

The answer to the first question is obvious to anyone with an economics background: we can tax carbon emissions. The answer to the second question is trickier, but our friends at the Carbon Tax Center have a plan.

In short, their plan is to phase in a $370/ton tax on carbon emissions over ten years. Every year, or perhaps every quarter, each legal resident of the U.S. would get a check equal to the total amount of carbon taxes collected divided by the number of residents. In essence, you would get a check that paid you for putting up with people’s carbon emissions.

This sounds like a brilliant idea if it can be implemented. Here are just some of the advantages:

1. It will actually help fix the climate. Unlike partial or even backwards solutions to the carbon emissions problem, this will actually level the playing field between energy sources (particularly renewables) based on how much each source pollutes. By choosing the least cost option, consumers can be relatively confident that their choice is also the best for the earth. Moreover, it provides the sort of price stability and predictability that is sorely lacking in so-called cap-and-trade schemes.
2. It will help reduce other pollution. Because nearly all combustion of fossil fuels releases other pollutants into the air (like particulates and acid rain- and smog-forming chemicals), reducing combustion of fossil fuels will reduce these other pollutants at the same time. And the more carbon-intensive fuels also happen to be the worst polluters.
3. It will help reduce traffic. If it is more expensive to drive (with the tax on a gallon of gas rising 10¢ a year up to $1.00), more people will choose options other than driving solo. This will reduce the amount of money that local, state, and federal governments will have to spend on roads, and save time for people that have to drive.
4. It will help reduce the trade deficit. One of the biggest components of our nation’s trade deficit is oil. A carbon tax will both reduce the volume of oil imported, and also likely lower the amount of money paid to foreign nations that are supplying the oil due to the softened demand.
5. It will help prevent war and terrorism. Unfortunately, God decided to put much of our oil under other people’s countries :). Many of those countries have citizens and/or governments that are less than friendly to the U.S. and its interests. The War on Terror, such as it is, will be much more easily fought if we are not enriching hostile regimes with our oil dollars.
6. It will help prevent urban sprawl. Since a carbon tax provides a predictable and powerful incentive to use less energy, energy-intensive development patterns, such as large swaths of single-use development (a.k.a. urban sprawl) are likely to become less popular.
7. It will reduce resentment between profligate energy users and smug conservationists. It will be much less infuriating riding your bicycle next to a Hummer if you realize the owner is paying dearly for the privilege of polluting. Those smug cyclists will be transformed in the public consciousness to garden-variety cheapskates. In fact the “polluter pays” aspect of the proposal makes for an excellent talking point.
8. It won’t cost the average person a dime. The middle quintile of the income distribution uses precisely 20% of the vehicle fuel our country burns each year. A per-head rebate of carbon taxes paid will precisely offset the amount paid by the middle class. Because there is a strong correlation between income and the amount of fuel consumed, poor people would get an extra refund, whereas higher income people would pay a bit more. The rebate aspect turns what would otherwise be a regressive tax into a progressive one.
9. It won’t cost the government a dime. That may be overstating things a bit, but the infrastructure to distribute the rebates is basically already in place: You would add a line to Form 1040 where the taxpayer would multiply the number of exemptions by the predetermined per-person rebate, and add it to the amount of taxes paid for the year. The taxing infrastructure is mostly in place as well, since duties are already collected at ports of entry, electrical and gas utilities already pay taxes, and fuel taxes are already collected from wholesalers.
10. It will prepare us for a future where energy is scarce. Most knowledgeable people agree that the era of cheap oil is gradually—or perhaps even rapidly—coming to a close. As oil becomes scarce and prices rise, we have a choice: we can let the resulting windfall enrich dictators and oil tycoons, or we can help it enrich every resident of the country. But most importantly, a carbon tax provides an incentive to make the sorts of adjustments to our energy use now that will only get more painful as time goes on.

A carbon tax is obviously a tough sale politically. But there has been a dramatic shift in the attitudes of both politicians and the public toward the challenge of climate change. By framing the issue as making the polluters pay, and by returning the tax to the public as a refund, it’s possible that we could achieve a rational, market-based approach to solving this crisis.

*The Corporate Average Fuel Economy law specifies an average fuel economy for the vehicles sold by a manufacturer in a given year. It is, like most laws, rife with loopholes: SUVs and pickup trucks (increasingly used as passenger vehicles) are held to a lower standard, and heavier SUVs and trucks aren’t held to any standard at all. But perhaps the biggest loophole is the fact that the mileage of any vehicle capable of running on E85 (because it is only 15% gasoline) is inflated by a factor of 7, even though the vast majority of so-called flex-fuel vehicles will never run on such a mixture.