Earth Equity News

Gore's 'Tax Shift' Beats Cap-and-Trade. Commentary by Elaine C. Kamarck, Roll Call, August 3, 2009. "When Al Gore wrote his best-selling book Earth in the Balance, he proposed putting a tax on energy based on its carbon content (which would raise the price of energy) and then cutting the payroll taxes of average Americans so they would not suffer economically while having new incentives to conserve. But over the years, Gore's 'tax shift proposal lost favor. The energy tax proposed by the Clinton administration in 1993 died a quick and brutal death (it raised taxes on energy but did not cut other taxes), while the cap-and- permit trading scheme for sulfur dioxide (which causes acid rain) turned out to be very successful. So by the time the Democrats were back in control of Congress and the White House, cap-and-trade had become the preferred way to deal with climate change, and even Gore had moved away from the tax shift idea... [However,] the more voters hear about cap-and-trade [central to the bill passed by the House and now making it's way through the Senate], the more they are likely to flinch and the more politicians are likely to back off. Consequently, we all need an alternative, a 'Plan B.' Washington would be well-suited to go back to Al Gore's original idea -- tax carbon and cut payroll taxes. This is the preferred policy for most economists and for many environmentalists too. Once Congress looks past the word 'tax' in the title, it's easy to see the important political advantages this policy has over a cap-and-trade system.

"For starters, a carbon tax is predictable and easy to understand. It could be phased in over a period of five to 10 years. Businesses and consumers would know exactly how much the carbon in their energy and gas would cost, enabling them to plan accordingly. The second major advantage of a tax is that its costs to households could be directly offset. Citizens can see exactly how much more they will have to spend on energy and exactly how much more of their paychecks they'll get to keep from the corresponding payroll or income tax cuts. This carbon tax-shift is a much better way to go about putting a price on carbon than a cap-and-trade system. And fortunately, there's still an opportunity for the Senate to acknowledge this and to improve its version of the climate bill. Though Congress has included a lot of good environmental policies in the 1,400 pages of the American Clean Energy and Security Act of 2009, its proposed carbon market isn't one of them. We don't have time to get this wrong. We don't have time to wait another five years -- the time it has taken Europe to discover that its cap-and-trade system has failed to effectively reduce emissions... Our leaders in Washington need to take pause and consider all the options available to make sure we enact the right policy." Elaine Kamarck -- a lecturer in public policy at the Harvard Kennedy School of Government and co-chair of the U.S. Climate Task Force -- is the author of the newly released report Addressing the Risks of Climate Change: The Politics of the Policy Options [24 pp].