Hassett signs up
If our leaders are serious about weaning us off of oil, then the economic textbooks provide guidance on how to do it. Government should tax things that produce pollution. If you are worried about global warming and energy security, then you should support a carbon tax.
Consider a tax of $15 per metric ton of carbon dioxide -- a tax rate comparable to the current carbon price in the European Emissions Trading System. Focusing only on carbon and assuming a short-term reduction in carbon emissions of 10 percent in response to the tax, a $15-per-ton tax rate would collect almost $80 billion a year, an amount that represents 28 percent of all corporate taxes collected in the U.S. in 2005.
The price changes aren't huge. The price of gasoline would increase by 13 cents a gallon, the cost of electricity generated by natural gas by 0.6 cents per kilowatt-hour, and the cost of electricity generated by coal by 1.4 cents per kwh. And all that revenue could be used to reduce corporate taxes, perhaps even stimulating higher economic growth....
If the president and congressional leaders are serious about energy security and global warming, they should zero out all our energy programs and replace them with a carbon tax.