July 10, 2007

Key Committee Chairman in House to Use Strange Maneuver to Block Carbon Tax

John Dingell (D-MI), chairman of the House Energy and Commerce Committee announced last week that he would propose a carbon tax that would add 50 cents to the total cost of a gallon of gasoline -- just to prove to the world how unpopular it is. Dingell told reporters that he expected to receive criticism that would put an end to further discussion of a carbon tax.

Dingell's experiment seems a little skewed to say the least. If Congressional leaders really were considering a carbon tax, they would likely step forward cautiously, taking time to educate the public and build their case that a crisis is developing which warrants this type of tax, working behind the scenes all the while to address members' concerns, and then at the right moment the legislative proposal would be unveiled in detail. Dingell's bid is clearly a move to rile up as much opposition as possible to a policy he opposes, which he will point to in the future as precedent or proof that the carbon tax is politically unpalatable. He is, after all, from the Detroit suburbs.

Which is unfortunate because a carbon tax is at least worth debating. There are some significant problems with the concept. As with any tax on consumption, a carbon tax burdens people of low incomes disproportionately, making this tax regressive. But it's worth considering whether Congress could take steps that would balance out these aggressive effects and use the carbon tax as a way of reducing the emissions that cause global warming.

Dingell, who is to produce some sort of climate change legislation sometime soon, apparently favors the cap-and-trade concept, which would require Congress to set an overall limit for total emissions and then perhaps auction off permits to pollute that would keep total emissions under that limit. The permits could then be traded from those companies that find they're able to reduce pollution quite easily to those companies that find they need more permits to continue operating at a profit. In theory this could lead to a more efficient outcome, but many economists have questioned whether the level of bureaucracy involved and the need for detailed rules will make it difficult to create a cap-and-trade program that is successful.


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