The T-Word

by Richard T. Stuebi

One of the bummers of having been in the energy/environmental field for so long is that rarely do I read or learn something I haven’t heard of before. It’s hard to for me get excited anymore.

Perhaps one of the silver linings of the current economic malaise is that thought-leaders are coming with novel and interesting ideas for the public sector to raise revenues. Yes, that’s right, new taxes.

Two recent examples. First, an intriguing idea put forth by Ian Ayres and Barry Nalebuff in the March 16 Forbes: a voluntary gas tax. This brings back, in different clothing, the concept of war bonds that could be marketed as a matter of patriotism to promote energy independence: citizens can optionally buy an advance tax rebate in exchange for paying an extra amount per gallon of gas purchased at the pump. If you drive little, or drive a fuel-efficient vehicle, you can actually profit from this transaction.

Second, Seattle city officials are considering a $0.20 charge per plastic or paper shopping bag. The idea is up for referendum in August, but unfortunately, it seems that the idea is on the ropes. It’s too bad, because the same idea has been in place (unbeknownst to me) in Ireland since 2002, and appears to be working well.

Although four-letter words are considered nasty, there’s no worse word in the American lexicon than that little three-letter devil. No politician can afford to raise the specter of new taxes, even when they’re desperately needed to balance budgets while encouraging more responsible behaviors.

The cap-and-trade legislation is being threatened by opponents who claim it is nothing but an energy tax (see, as an example, the March 9 editorial by the Wall Street Journal). The dirty little secret is that they’re right: cap-and-trade is a tax. Does the mere fact that something is a tax mean that it shouldn’t be adopted?

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director at Early Stage Partners.

3 replies
  1. Dale
    Dale says:

    Taxes are no different than any other product in a marketplace: If people don’t perceive enough value, the tax won’t come to be.Politicians, like product managers, are never short of reasons for why the need is great for what they have to sell. But if the public doesn’t believe in the value, coercion is a very bad policy for a whole host of reasons.The irony is that when enough people believe in cloth grocery bags and carbon reduction, there won’t be a need for a tax. Instead, people will choose products that directly or indirectly provide the desired benefit.

  2. Dan
    Dan says:

    “Does the mere fact that something is a tax mean that it shouldn’t be adopted?No, but if we’re going to think about something that is effectively a tax, why not go a step further and adopt the gold standard – a well-designed and revenue-neutral carbon tax. For details see the Carbon Tax Center web site.Dan RosenblumCo-DirectorCarbon Tax Center

  3. Hat Trick
    Hat Trick says:

    Richard,The point of the WSJ’s editorial isn’t so much that cap and trade is a tax. Their point–and I agree with it–is that cap and trade is a poor substitute for a tax. It’s inefficient and creates opportunities for rent seeking that have no basis in pollutant control. The concept of a carbon tax is widely supported among just about anyone who understands markets and is concerned about climate change–everyone, that is, except for politicians. They love cap and trade because they can pretend that it’s not a tax, and it raises money they can spend. If we’re honest with ourselves and we genuinely want to make an impact on the climate and shift away from fossil fuels, we’ll TAX (don’t be afraid to say that word) carbon and spur both behavioral change on the behalf of the consumer, as well as incent market driven solutions to lower emissions. This isn’t the only thing that needs to happen, but it’s a lot more honest than cap and trade.But then, who ever thought Washington cared about honesty?

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