The Irrefutable Logic of a Carbon Tax    

The case for a carbon tax is irrefutable.    

Energy Policy Cartoons 17
By + More

Suppose you take your child to the pediatrician for a check-up. After running a battery of tests, the doctor returns with bad news: The child has a serious illness.

“How serious?” You ask.

“Well,” the doctor answers, “Mainstream thinking in medicine is that this particular disease grows progressively worse if left untreated and is potentially devastating. The major pediatric associations recommend treatment right away.”

Then the doctor says, “I have to tell you, however, that there are some skeptics – fewer than there used to be, and some more credible than others, but if you search the Internet, you will find people who don’t believe that your child is seriously ill.”

At some point in the conversation, you would ask a really important question: “What is the harm of treating my child if it turns out that she’s not really sick?”

“There are no adverse side effects,” the doctor answers. “In fact, the treatment has some mildly beneficial effects. However, it is very expensive.”

[See a collection of political cartoons on energy policy.]

When you sit down with your spouse, you calculate that the recommended course of treatment would cost about 3 percent of your expected lifetime income. That is a big number, but not a life-changing sum. In fact, it’s a modest price to pay to protect your daughter against the prospect of a serious illness.

To summarize: If you take the advice of the experts – most credible pediatricians – and they turn out to be wrong, then you will have spent 3 percent of your lifetime income for the equivalent of a multi-vitamin (beneficial but not life-saving).

If you take the advice of the skeptics and they are wrong, then you’ll save a relatively modest amount of money in the grand scheme of things and your daughter will become seriously ill. You will be able to treat her later, but by then it will be more costly and less effective.

Is this a hard decision? No. Any sane parent would start the treatment immediately as a sensible precaution against a potentially disastrous outcome. It’s not really much of a decision at all.

So why are we having a debate in this country about climate change policy?

What I’ve just described is a parable of our national decision regarding carbon emissions. Most experts believe that carbon emissions are changing the planet in ways that will prove harmful; there is a nonzero possibility that these changes could interact in ways that are catastrophic.

[See a collection of political cartoons on the economy.]

Obviously there are those who disagree with that scientific assessment. But the point of this analogy is to make clear that the debate over climate science is a red herring. Even in the face of uncertainty over the effects of global warming – including whether it is happening at all – the policy we ought to pursue is a no-brainer. We ought to protect ourselves from a potentially catastrophic outcome by curtailing carbon emissions now.

The other details of my medical analogy are not arbitrary. The Congressional Budget Office estimates that if the United States were to pursue an aggressive policy to reduce carbon emissions, it would cost between 1.5 and 3 percent of our national income between now and 2050. That is a big number, but not one that would change life as we know it in America.

And if we’re not sick with global warming? Then raising the cost of carbon emissions would still have positive “side effects.” It would reduce conventional pollution, reduce traffic congestion, reduce our dependence on energy from hostile parts of the world, promote renewable energy and promote cleaner carbon-based fuels like natural gas over dirty ones like coal.

Any kind of carbon tax would raise government revenue that could substitute for revenue that we currently raise by taxing income, capital and savings. If we tax carbon, people pollute less. If we tax income, people work less. There is not an economist I’ve ever met who prefers the latter to the former.

We ought to think about curtailing carbon emissions as a form of insurance.

[Read the U.S. News debate: Is a Carbon Tax a Good Idea?]

Would any sensible financial analyst hesitate to spend 3 percent of his portfolio to protect against a contingency that economists are warning could wipe away much of the principal?

Would any homeowner hesitate to spend 3 percent of the value of his or her home to protect against a hurricane that most meteorologists say is bearing down dangerously on the property?

Does any sensible person ever wait until they are 100 percent sure that something really bad is going to happen before taking any precaution against it?

No, no and no. In any situation involving risk, we ask some basic questions: 1) What is the worst thing that could happen? 2) How can I protect against that? And 3) What do I give up if I protect against a contingency that never comes to pass?

That is how we ought to approach climate change. Basic logic tells us that doing nothing is indefensible.