Last weekend, the Financial Times published a must-read editorial on the need for a national carbon tax:
"Taxes are always a regrettable necessity, but some are less regrettable than others. A tax that strengthens energy security and cuts pollution, while minimising the damage done to employment and investment, is one of the least regrettable of all."
"Yet a carbon tax, which has all those characteristics, is struggling to find support from the US administration or in Congress. It deserves much wider enthusiasm."
"One of the few uncontroversial conclusions of economics is that it is better to tax “bads” than “goods”. Wages and profits are desirable objectives, and governments have no good excuse for obstructing them. They are taxed largely for reasons of convenience, at the cost of disincentives to wage-earning and profitmaking that are a drag on the economy."
"Energy consumption, on the other hand, is not an objective for anyone. Indeed, the negative externalities of energy use, including local pollution and greenhouse gas emissions, mean that, other things being equal, an economy that burns less fuel is better off."
"That insight lies behind support from across the political spectrum for a tax linked to the carbon content of fossil fuels, generating revenue that could be recycled through cuts in other taxes. Four leading Democrats in Congress this month proposed such a tax, and asked for suggestions for how it could be implemented. On the Republican side, a carbon tax has been backed by several prominent figures, most notably Greg Mankiw of Harvard, a former economic adviser to George W. Bush and Mitt Romney."
"Carbon taxes have their drawbacks, it is true, but their problems are mostly fixable. They are regressive, but that could be offset by changes to other taxes. They can create difficulties for energy-intensive sectors, but those could be eased with targeted reliefs."
"The claim made this week by more than 85 Republican members of Congress that carbon taxes would “kill millions more jobs” has no evidence to support it."
"While the adjustment to higher energy costs would have some negative impact, it would be offset by the benefits of cuts in other taxes. Curbing consumption would also improve energy security, making the economy less vulnerable to commodity price shocks. President Barack Obama on Friday set out an energy agenda including reduced oil imports, greater use of natural gas and increased energy efficiency. A carbon tax would help meet all of those goals."
"The prospect that extra revenues will be needed to stabilise the public finances in the long term suggests that some taxes are likely to rise, and a carbon tax would be one of the least painful ways to do it. Shifting the tax burden off incomes and on to carbon would be a good idea at any time. Right now, the case is overwhelming."