Thomas L. Friedman’s column in today’s New York Times, Show Us the Ball, should be must reading in the White House and on Capital Hill. Following up on a series of excellent columns urging passage of a revenue-neutral carbon tax, Friedman once again incisively states the case for a carbon tax. We quote some of the high points below, but the column should be read in its entirety and then forwarded widely.
Friedman begins by asking the right questions about cap-and-trade
Can cap-and-trade pass? Will it really work? And is it the best strategy, with all the bureaucracy it will require to monitor, auction emissions permits and manage the trading?
He then accurately characterizes cap-and-trade proponents as arguing “that it is preferable to a simple carbon tax because it fixes a national cap on carbon emissions and it ‘hides the ball’ — it doesn’t use the word ‘tax’ — even though it amounts to one,” and then makes it clear that game just isn’t going to work:
In the past two weeks, you could hear a chorus of Republicans, coal-state Democrats, right-wing think tanks and enviro-skeptics all singing the same tune: “Cap-and-trade is a tax. Obama is going to raise your taxes and sacrifice U.S. jobs to combat this global-warming charade, which many scientists think is nonsense. Worse, cap-and-trade will be managed by Wall Street. If you liked credit-default swaps, you’re going to love carbon-offset swaps.”
Friedman’s strategy is right on target, “Since the opponents of cap-and-trade are going to pillory it as a tax anyway, why not go for the real thing — a simple, transparent, economy-wide carbon tax?” Friedman then describes America’s Energy Security Trust Fund Act of 2009, proposed by Congressman John Larson, and describes why it’s the way to go:
People get that — and simplicity matters. Americans will be willing to pay a tax for their children to be less threatened, breathe cleaner air and live in a more sustainable world with a stronger America. They are much less likely to support a firm in London trading offsets from an electric bill in Boston with a derivatives firm in New York in order to help fund an aluminum smelter in Beijing, which is what cap-and-trade is all about. People won’t support what they can’t explain.

David Collins says
Tom Friedman’s essay is right on target. However, the next NYT article, “In Areas Fueled by Coal, Climate Bill Sends Chill” points toward why Carbon Tax revenues should be refunded to citizens on a pro-rata basis, rather than cutting payroll or other taxes. Those who will need it the most are those who pay little or no payroll tax: the retired, and the low-income workers.
Daniel Rosenblum says
Good point regarding the need to protect those who pay little or no payroll tax. One approach is to refund the carbon tax on a pro-rata basis. The tax route can also work. The Center on Budget and Policy Priorities has “outlined possible ways of delivering this additional support, through a combination of tax credits to consumers generally and electronic benefit transfers to very-low-income consumers who are not in the tax system.” While the Center was discussing the use of revenues from a cap-and-trade program, the mechanics for distributing carbon tax revenues should be the same as for distributing cap-and-trade revenues.
Jeff Dauphin says
Once the public begins to understand the connections between cap and trade and big banks, which will come out sooner or later, it could be politically devastating. Tom Friedman’s article is one of the first to begin to explain this and more will follow. Consider the intense public outrage that has occurred regarding bonuses and the general public distrust of big banks. Now, look at some of the big players in the existing U.S. cap and trade program we have — EPA’s annual auctions of SO2 allowances as part of the market-based sulfur dioxide (SO2) allowance trading component of the Acid Rain Program. The annual results are available at: http://www.epa.gov/airmarkets/trading/auction.html. Big bank players over the last three years include: JP Morgan Ventures Energy Corporation; Cantor Fitzgerald Brokerage; Merrill Lynch Commodities Inc.; and Morgan Stanley.
Jeff Dauphin
eNewsUSA Blog: http://enewsusa.blogspot.com/