Listen to an economist at the Niskanen Institute or a former Republican legislator like Bob Inglis, and for a moment you might think that a carbon tax is an elegant conservative “fix” to climate change. It’s not.
First, a tax — on energy or anything else — is not a market-based solution (and therefore not conservative in any way, shape, or form). It’s not a market-based anything. It is a government stricture alerting you (the riff-raff) that your betters want you to either do or not do something. It is designed specifically to rob you of choice and transfer that power to government.
Second, taxes are never elegant. They are messy, expensive and destructive. Taxes on energy are particularly bad. The real problem with a carbon tax (and by that I mean, an energy tax) is that is makes the act of living more expensive, which is problematic for the poor and those on fixed incomes. It has the practical effect of making everything manufactured, grown, or transported — meaning, everything — more expensive.
Third, the idea of a regulatory swap of no carbon regulation in exchange for increased taxes is fantastical. It exists only in the realm of make-believe. Why would the Left, which has spent generations erecting and perfecting the regulatory State, give it up for a few measly dollars that it will probably get anyhow through other places in the tax code?
This is not an academic exercise. As Congress wanders towards comprehensive (is there is any other kind?) tax reform, the door will open to truly bad ideas. It is easy to imagine that tax reform will include a few terrible revenue raisers. One of those will almost certainly be an energy tax. There is plenty of conversation among Democrats about such a tax (Senator Schumer has promised that Hillary Clinton would support such a tax, even though she has declined to support the idea.) It “solves” the problems of doing “something” about climate change and how to pay off the international community. Most importantly, it is a tax that allows companies to shift compliance costs to consumers.
It may also be important to note that some companies are probably a lot more concerned about preservation of tax treatments like dual capacity than they would be about the imposition of a carbon tax. Or perhaps companies are concerned about acquisitions they made when natural gas was settling at $12/MMBtu, more than four times the current price. Or perhaps some companies are looking for ways to minimize the volume on public relations and potential legal problems. All of these have at least one thing in common – the benefits of a carbon tax accrue to shareholders, the costs accrue to customers (whose demand for energy is, in most cases, inelastic).
In short, an energy tax is a terrible idea, encouraged by terribly unthinking people. It will make people poorer, companies richer and the government more powerful.