The articles Can Countries Cut Carbon Emissions Without Hurting Economic Growth? and The Most sensible Tax of All both dealt with the ever-popular issue of carbon emission reduction. One dealt with the economic impacts to countries with cutting carbon emission, while the other lauded the use of taxation to increase cost of pollution. While both articles made great points regarding the problem with controlling carbon emission, the idea of increasing taxation on business seems like an impossible goal given the current political climate. With the House of Representatives unable to come to an agreement even on increase taxation of households with income higher than $250,000 to increase government revenue, it is highly unlikely that both Senate and the House will agree on changing the tax code to include taxation on carbon emission.
Perhaps we are simply too used to thinking carbon emission as a negative externality. Given that we perceive prices in competitive market do not reflect the full cost of carbon emission within the goods that are produced, our first instinct is to adjust the price of the good and let the “invisible hand” guide the demand and supply of goods. While this is one solution to the current problem, it will take time and effort to lobby for major changes to the tax code to achieve the desired result. Given the political gamesmanship and gridlock in the current US congress, it may take decades to achieve that goal.
Maybe a simpler short-term solution is to treat clean air as a public good, just like education and public housing. Since we know a competitive market driven by self-interest parties will be unlikely to provide these goods, government can step in and produce them for public benefit. Similar to HOPE VI program by US Department of Housing and Urban Development and the Section 8 Housing Program, the Federal government can appoint an agency to “provide” certain quantities of clean air per year. Legislation can be made to “encourage” private sector to limit carbon emission and/or subsidize green projects. Instead of increasing taxation, it may be possible to offer a small reduction in corporate tax rates in exchange for carbon reduction.
HOPE VI: http://en.wikipedia.org/wiki/HOPE_VI