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George Will on why a carbon tax is much preferable to cap and trade

The Warner-Lieberman bill has been withdrawn for consideration by Congress this year – and thank goodness. 

Why do I say that?  A few weeks ago George Will published a column that explains very clearly why we are fortunate that this bill has been put on hold, and why, if any climate change policy is to be adopted by government, a carbon tax is much preferable to cap and trade.  Here are excerpts (with my emphasis added in bold):

If carbon emissions are the planetary menace that the political class suddenly says they are, why not a straightforward tax on fossil fuels based on each fuel’s carbon content? This would have none of the enormous administrative costs of the baroque cap-and-trade regime. And a carbon tax would avoid the uncertainties inseparable from cap-and-trade’s government allocation of emission permits sector by sector, industry by industry. So a carbon tax would be a clear and candid incentive to adopt energy-saving and carbon-minimizing technologies. That is the problem.

A carbon tax would be too clear and candid for political comfort. It would clearly be what cap-and-trade deviously is, a tax, but one with a known cost. Therefore, taxpayers would demand a commensurate reduction of other taxes. Cap-and-trade — government auctioning permits for businesses to continue to do business — is a huge tax hidden in a bureaucratic labyrinth of opaque permit transactions. …

Lieberman guesses that the market value of all permits would be “about $7 trillion by 2050.” Will that staggering sum pay for a $7 trillion reduction of other taxes? Not exactly.

It would go to a Climate Change Credit Corporation, which Lieberman calls “a private-public entity” that, operating outside the budget process, would invest “in many things.” This would be industrial policy, a.k.a. socialism, on a grand scale — government picking winners and losers, all of whom will have powerful incentives to invest in lobbyists to influence government’s thousands of new wealth-allocating decisions.

Lieberman’s legislation also would create a Carbon Market Efficiency Board empowered to “provide allowances and alter demands” in response to “an impact that is much more onerous” than expected. And Lieberman says that if a foreign company selling a product in America “enjoys a price advantage over an American competitor” because the American firm has had to comply with the cap-and-trade regime, “we will impose a fee” on the foreign company “to equalize the price.” Protectionism-masquerading-as-environmentalism will thicken the unsavory entanglement of commercial life and political life.

McCain, who supports Lieberman’s unprecedented expansion of government’s regulatory reach, is the scourge of all lobbyists (other than those employed by his campaign). But cap-and-trade would be a bonanza for K Street, the lobbyists’ habitat, because it would vastly deepen and broaden the upside benefits and downside risks that the government’s choices mean for businesses.

  1. Owl
    July 2nd, 2008 at 05:11 | #1


    Thank you. I have also responded. Any idea what happened to the site when it went offline for several days?

  2. TokyoTom
    July 1st, 2008 at 06:32 | #2

    Owl, please note that I’ve posted a few more thoughts back on Bob Murphy’s thread: http://www.gene-callahan.org/blog/2008/06/murphy-answers-silas-on-cap-and-trade.html

  3. Owl
    June 27th, 2008 at 00:32 | #3


    The above is an interesting piece in itself, but do you know what happened to that cap-and-trade discussion on http://www.gene-callahan.org? Because I haven’t been able to reach the website for several days now.

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