>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).


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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