Making Fossil Fuels Pay for Their Damage
This post was originally published on Legal Planet. Reprinted with permission.
Production and combustion of fossil fuels impose enormous costs on society, which the industry doesn't pay for. I want to talk about some options for using the tax system to change that.
One option, a tax on carbon dioxide emissions, gets the most attention but seems politically impossible. The closest we've ever come to a carbon tax is a limited fee on methane emissions under the new Inflation Reduction Act (IRA) law. A more promising alternative might be a clean-up tax on the fossil fuel industry.
If a carbon tax were politically feasible, there would be a lot to be said in its favor. Economists like carbon taxes better than regulations, and environmental justice advocates like them better than cap and trade. A carbon tax could cover the economy without the need for scores of regulations tailored to each industry. It wouldn't require placing bets on what zero-carbon technologies will win out. It would provide an incentive for cutting carbon emissions, with the byproduct of cutting air pollution everywhere. Unlike emission trading systems, they don't require designing and operating new markets. It could be designed to avoid regressive impacts …
Earlier this year, on the heels of the Earth's hottest decade on record, a coalition of former government officials, fossil fuel companies, car manufacturers, financial companies, and nonprofit organizations renewed their endorsement of a national carbon tax as "the most effective climate solution" (emphasis added). And by "the," it appears that they mean "the only." The catch is that the coalition's legislative plan also calls for preventing the federal government from regulating carbon emissions and from taking any other protective measures "that are no longer necessary upon the enactment of a rising carbon fee."
Given the scale and complexity of the planetary emergency that we face, it would certainly be nice if the solution were that simple. But that, of course, is too good to be true. A carbon tax may very well be one important component of the climate crisis toolbox, but …
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