A Carbon Tax Is Better for Cars

I have a knee-jerk distaste for cap-and-trade solutions to our carbon problems. To me, cap-and-trade fails the basic test of being easy to understand. When you scale up something that’s complex—as we would have to if we passed cap-and-trade legislation—major failure becomes an option. The most popular alternative, a carbon tax, is by contrast quite simple. Emit more carbon, pay more tax. QED.

Right now, there’s consensus that one of the two schemes will eventually come to pass. Cap-and-trade is the frontrunner, although Chris Weigant over at the HuffPo thinks it’s a goner this year and maybe next, even though Obama has supported it. Politics has intervened.

As far as the auto industry goes, a carbon tax would ultimately be the better option. It would add costs to the production of automobiles, forcing better decision-making in the design and engineering process. But more importantly, it would function as a kind of stealth gas tax. I like the idea of a gas tax because I think we need one in order to buy ourselves time to develop viable non-petroleum transportation over the long haul (by 2050, let’s say, at which point the peak oil problem should be much more apparent). A carbon tax would enable us to preserve the world’s shrinking supply of easily accessible oil long enough for good, electric-powered alternatives to the internal-combustion engine to come along. It wouldn’t just be a carbon tax—it would be a carbon tax that encourages conservation. Not insignficantly, we'd get to keep our cars.

In trying to figure out whether a carbon tax is the best way to go for an automotive culture, however, I also came across another good argument, courtesy of Phil Levy at Slate sister site Foreign Policy. Here’s the language:

“The big critique of a carbon tax is that it cannot guarantee a country will come in under a pre-set emissions cap. If the desire to pollute is really, really high one year, we could find that a given tax won't serve as a sufficient deterrent, and we'll blow past our limits.”

So we’d know, immediately, that our desire to pollute had intensified and that we’d failed in establishing a realistic emissions cap. We’d have met the enemy and seen it was…us. We could then have a debate about raising the tax to deal with the problem, rather than assuming that a cap-and-trade plan would establish a price for polluting that's high enough to prevent polluters from simply deciding to take the hit.