October 16, 2007
Carbon Tax: I have no idea what Mark Gimein is talking about
At Time Magazine, he argues against a carbon tax on the grounds that, although it would induce behaviour change by discouraging coal-burning, car drivers would just pay the tax and keep driving, and that’s not fair on them.
I’m trying to understand, but I can’t. Assume Gimein (citing Gilbert Metcalf [pdf]) is right. Then we’ve discovered a non-distortionary source of taxes, and that’s far preferable to income tax, capital gains tax or the current favoured tax in the US, the grandchildren tax (or budget deficit). So that’s pretty good going.
More likely, though, Gimein and Metcalf are wrong about how people would respond to the tax. The economy is impossibly complex, especially as technology changes over time. What we do know is that a carbon tax gives people an incentive to cut down on carbon emissions. And the ways in which they do that are likely to surprise us.
