Don't Believe Hype About Carbon Fee & Dividend

There are some in Georgetown that are advocating with City Council to pass a resolution supporting a carbon fee and dividend similar to the one passed in Austin. Many liberal politicians, pundits and even climate scientists endorse this carbon tax. Notice, there are no trained economists supporting this idea.

In fact, here are two economists who show that such a scheme would fail miserably. RealClearEnergy

Today, some pundits and politicians who claim the conservative mantle argue that a carbon tax is a free market solution to a market failure. The purported failure is that the marketplace does not adequately price the estimated social cost of carbon, which is deemed to be the global damages of climate change from carbon dioxide emissions. Yet, there is nothing conservative or free market about the government expanding its role in our daily lives through a carbon tax. 

Often ignored by advocates of Pigouvian taxes is what gets referred to as “the knowledge problem.” That is, the few individuals in government lack sufficient information from prices and other sources available among the millions of individuals in the market to make sound decisions. 

By taxing an economic input like energy production, government essentially taxes everything that we do, wear, eat, and use. History shows that this is all very destructive: Carbon taxes in Australia and British Columbia reduced standards of living, with Australia eventually repealing its carbon tax within just two years. 

While proponents of the dividend approach, or even a revenue-neutral tax swap, claim this is a market-based, conservative plan, the truth is a carbon tax is based on highly questionable assumptions, leaving it as mainly a policy tool for social engineering with huge economic costs 

The EPA reports that the aggregate emissions of six common toxic pollutants (carbon monoxide, lead, nitrogen oxide, volatile organic compounds, particulate matter, and sulfur dioxide) have declined by 67 percent since 1980. Meanwhile, gross domestic product is up 160 percent and population is up 42 percent. Energy-related carbon emissions are down to near 1992 levels —thanks primarily to innovations such as hydraulic fracturing that has allowed far more production of cleaner burning natural gas.

What is the old homily? "If it ain't broke, don't fix it".