There is no more effective way for President Biden to meet his aggressive climate goals than a carbon tax. The timing seems right: her Treasury secretary, Janet Yellen, has been a prominent advocate. Big business has gone from opponent to proponent. The Republican opposition is no longer monolithic.
But a carbon tax lacks support where it matters most: with Biden and the Democratic base. Progressive Democrats are demanding a carbon tax and their close cousin, cap-and-trade, are unfair to the poor and racial minorities. And a carbon tax appears to conflict with Biden’s promise not to raise taxes on any household that earns less than $ 400,000 a year.
So, while Biden is preparing a regulatory and infrastructure package aimed at reducing net greenhouse gas emissions to zero in electricity by 2035 and across the economy by 2050, he is struggling with one hand tied behind his back.
The price of carbon encourages consumers, producers and investors to replace fossil fuels with low- or no-carbon energy technology more smoothly and cheaply than subsidies and rules. This has long been evident to economists, including Yellen. She is a founding member of the Climate Leadership Council, a bipartisan group that presented a detailed plan for a carbon tax starting at $ 43 per ton, with the revenue returned to families as a “carbon dividend”.
In response to the senators’ questions at her confirmation hearing, Ms. Yellen said: “We cannot resolve the climate crisis without effective carbon pricing.” Although a carbon tax is the most direct way to price carbon, it is not the only one. With cap and trade, total greenhouse gas emissions are limited and companies buy licenses to emit a ton of gas. The more expensive the license, the greater the incentive to reduce emissions. Cap and trade was the centerpiece of the last major effort to price carbon in 2010. Ultimately, it failed due to opposition from businessmen, Republicans and some Democrats.