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Is It Time For A Carbon Tax?

Is It Time For A Carbon Tax?

Carbon Tax 420-470

June 27, 2013

Charles Komanoff, The Carbon Tax Center: Yes
Scott Segal, 
Bracewell & Giuliani LLP: No

There is no way to tackle climate change without taxing carbon pollution, according to Charles Komanoff. No other policies can do the job as effectively and broadly. Hoping the problem of climate change will fix itself isn’t tenable, not with the news that atmospheric concentrations of CO2 have passed 400 parts per million, a level not reached in at least three million years.

Segal counters that the case for a carbon tax seems more to do with hidden sources of revenue needed as chips for some grand bargain in tax reform than it does with any commitment to reducing greenhouse gases. Reducing greenhouse gases, he says, will prove difficult when the tax is imposed in the United States while the manufacturing industries and the energy upon which they depend can simply cross international borders. No unilateral policy that fails to include conforming behavior by China and India, he argues, will produce real reductions.

Komanoff says that our trading partners will follow our lead because WTO regulations empower carbon-taxing countries to neutralize unfair trading disadvantages by levying “border tax adjustments” on imports.

Segal maintains that a carbon tax is highly regressive, imposing a larger burden on low than on high-income households, as lower-income households spend a disproportionate amount of income on energy and energy-intensive necessities. One report estimates households in the lowest quintile would have a burden 1.4 to 4 times higher than those at the top quintile.

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