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Politics

Everyone's got a climate plan. So where's the carbon tax?

Catherine Rampell on

Sen. Elizabeth Warren, D-Mass., has a big, bold, multitrillion-dollar plan for addressing climate change. So does her rival Joe Biden. Likewise former Texas congressman Beto O'Rourke. And, of course, Gov. Jay Inslee, D-Wash., whose entire campaign is structured around the climate crisis.

These candidates, to their credit, have offered thoughtful solutions for addressing the most pressing policy challenge of our time. Their proposals are highly detailed and thorough, often running to dozens of pages in length.

And it's precisely because they're so detailed and thorough that it's so bizarre none of them explicitly mentions the obvious, no-brainer tool for curbing carbon emissions: putting a price on carbon.

A carbon tax (or its cousin, a cap-and-trade system) is almost universally embraced by economists on both the left and the right. With good reason, too. Taxing carbon means pricing in, upfront, the implicit costs that come from using fossil fuels -- especially, though not exclusively, the cost of warming our planet.

This approach has two main benefits.

The first is that it immediately nudges consumers and businesses away from purchasing carbon-intensive products, because (duh) those products get more expensive.

 

The second is that, over the longer run, it motivates entrepreneurs and investors to develop new green technologies, because they know they can make money as customers seek out cheaper, lower-carbon-footprint alternatives. Capital organically moves to wherever scientists and investors actually believe the most promising technologies lie, which might be ones that haven't even been invented yet.

"Pollution pricing policies bring out great American ingenuity," says University of Illinois economist Don Fullerton.

That's in stark contrast to a more top-down approach, in which the government requires or subsidizes the use of specific clean technologies. These kinds of mandates can distort demand toward technologies that were promising yesterday but will be bested by other (cheaper, more efficient) technologies tomorrow; or they might just benefit the producers that have the most persuasive lobbyists and valuable voting blocs (for example: ethanol).

To be clear, the candidates' proposals include many other good ideas. They all say we should eliminate subsidies for fossil-fuel companies. They all boost federal investment in and incentives for R&D in clean technology. This is critically necessary, especially for basic research, which private companies might not be sufficiently incentivized to undertake on their own.

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