Beware of the Stealthy Carbon Tax

The ironic thing in the debate over carbon policies is that opponents of massive new federal taxes and regulations don’t need to go to obscure websites or ideological Think Tanks to get their talking points. On the contrary, those of us who are very wary of giving the government more power over the entire energy sector (and hence economy itself) just need to quote verbatim from the supporters of such policies.

For example, the White House recently updated its estimate of the “social cost of carbon,” and showed that (for emissions in the year 2010) the number was either $11/ton, $33/ton, or $52/ton, depending on whether we discounted future damages (in the computer simulations of course) at a rate of 5%, 3%, or 2.5%. Such huge swings in this key input into federal policymaking should give everyone pause, as picking the correct “social discount rate” is hardly a matter of scientists in white lab coats objectively measuring Nature.

Moreover, this new update bumped up the estimates of the social cost of carbon from 2010 by a whopping 120% (for one calibration of the parameters). Finally, this bombshell announcement—which carries with it a change in “damage estimates” of at least $50 billion more per year, based on current US emissions—was released by the Obama Administration in a rule on microwave standards, with even supporters of the regulations scratching their heads.

For another example of proponents of a carbon tax showing just how dubious the whole project is, consider a recent piece in RealClearEnergy titled, “Why You Just May Come to Like a Carbon Tax.” Here’s one jaw-dropping excerpt: 

Enter the carbon tax. Besides its intended purpose of reducing carbon emissions, it is politically advantageous, in that it is a tax that is relatively hidden. If phased in over a decade, the annual increase in gas prices that would result would be less than the typical annual fluctuations we already observe. And its other manifestations are also somewhat less than obvious—power bills will go up, but they’ve been inexorably increasing since time immemorial, even in places that get most of their power via natural gas.

Now if the author, Ike Brannon, were advising members of Congress from coal states behind closed doors, the above commentary would be creepy but understandable. Yet he’s writing this in broad daylight, as one of several reasons that Americans should get behind a carbon tax? This is incomprehensible. In general, when it comes to tax policy as well as other areas of government, things should be as transparent as possible, so that the citizenry has an inkling of the impact of various measures. By praising a carbon tax for its ability to sneak past most of the public (who presumably don’t read RealClearEnergy), Mr. Brannon has decided that he knows better than they do.

In conclusion, when assessing the merits of a massive new federal tax and/or regulatory scheme that will drive up energy prices—by design—and do so in a way that is based on arbitrary parameter choices and that will bamboozle the public, we don’t need to consult “denier” websites. We can simply read what the proponents themselves are saying.