Another look at revenue-neutral carbon tax

While I can appreciate initial reticence regarding any policy with “tax” in the name, I must take issue with nearly every point made in Daniel Coffey’s column, "A revenue-neutral carbon tax redux" (May 22, 2014).

To start with, a revenue-neutral carbon tax (RNCT) is surely anything but a "pedantic exercise"; it provides a clear, economywide price signal that begins to reflect the full costs of fossil fuel consumption, the negative effects of which are borne by everyone, regardless of personal consumption.

Pricing is fundamental to all economic activity, and in the case of a carbon tax, will level the playing field so that sustainable, clean energy can compete fairly with polluting, non-renewable fossil fuels — all without the need for regulatory inspections or tax dollars being doled out by politicians to their favorite technologies or industries.

To be clear, a carbon tax is collected directly at the well-head, mine or port of entry, based on the carbon content of the material. Contrary to Coffey’s contention that this content is variable and up for debate, there is no gaming possible: Basic chemistry tells us how much carbon is produced by any given fuel. Levying the carbon tax at the highest point upstream in the economy is in fact extremely efficient and immune to evasion.

Compare the amount of time spent in the past year paying your sales tax versus your income tax. And when was the last time you worried that your purchase’s sales tax actually made it to the state or county? The distribution of the revenue — via dividend — would be automatic and therefore immune from political tampering, using existing payment infrastructure: the Department of the Treasury.

Coffey is concerned that the dividend checks will be too small to bother with. While it is true that the tax rates — and the corresponding dividend — start out small, this is intentional. An initially low, but steadily rising, price gives individuals and businesses the time to adjust and plan for future realities without causing undue dislocation or crisis.

The “steadily rising” aspect is important in that it provides the market with a clear vision of a low-carbon future, motivated by price signals, to stimulate the necessary investment and innovation to make the transition happen. The annual dividend anticipated from an initial $10 per ton, escalated by $10 per ton per year carbon tax is more than $3,600 per household of four. Surely this check merits the effort to deposit or spend!

I trust that Coffey is as concerned about both climate change and social justice as he has claimed in past columns. I would simply ask him exactly what policy he endorses to meet these challenges, preferable to an RNCT. Any policy can be attacked with what-ifs and hypotheticals; indeed, policy must be designed with these in mind and fortified accordingly.

I contend — and many agree with me — that an RNCT has answered these concerns, and has benefitted from the many lessons learned from attempts such as cap and trade and renewables standards, which, though perhaps politically palatable, are ultimately toothless and therefore ineffective.

For the sake of our children and our world, we should be bold and embrace RNCT as the most promising policy we have to wean us from our destructive addiction to fossil fuel and hasten our civilization’s path to sustainability.

Michael McEachen

Santa Barbara

User Response
0 UserComments