>Cap and trade? Carbon tax? How about both!

>See this article for an interesting analysis of combining a carbon tax with an auctioned cap and trade system.

Some hand calculations for the US give me that we could combine a $20 per metric ton carbon tax with a $400 per person refundable tax credit and be just about revenue neutral.

$20 per ton is about $0.20 per gallon of gasoline or about $0.03 per kWh for electricity from coal. Of course, other forms of electricity are less carbon-intensive.

I advocate carbon taxing not so much because of environmental concerns, but based on the economic principles behind pigovian taxing – that you should tax things that have social costs. Combined with that, you should reduce taxes on things you want more of, like wages (an alternative to a refundable tax credit is to reduce payroll tax on the first $5000 in wages).

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About perkinsms

I'm an engineer and father interested in transit, parking and economics.
This entry was posted in budget, carbon, economics, environment, fiscal, gas, politics, spending, tax. Bookmark the permalink.

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