Tuesday, June 20, 2017

A Market Based Proposal For Cutting Carbon Emissions

The law of supply and demand suggests that the demand for a product falls as the price rises.  It follows that a tax on carbon would raise the price of carbon and reduce the demand.  There has been a lot of support for a carbon tax as weapon to mitigate climate change.  This proposal adds a dividend to the package.  The revenue collected from the carbon tax would not be used for any purpose by the government.  It would not be used to increase spending and it would not be used to fund tax cuts for the rich.  The dividend would be distributed equally to every household.  Low income households consume less carbon than high income households but both households would receive an equal dividend.  In a sense, high income households would pay a higher tax on carbon.

There are other features in this plan that should appeal to conservatives.  The carbon tax would increase the price of fossil fuels relative to green energy sources.  The government would not need to determine which source of green energy to subsidize. It would also accelerate the substitution of low carbon fossil fuels for less desirable fossil fuels like coal.  The government could also reduce programs that manage energy consumption if the carbon tax did its job.

This proposal was developed by an elite group of citizens who were unhappy with Trump's decision to exit the Paris accord.  It would also tax carbon products imported into the US.  In that sense, it would have an international impact on carbon emissions.  It will also be regarded as a serious proposal by many who have resisted government efforts to fight climate change.

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