Former Treasury Secretary Larry Summers, now an economist at Harvard University, argued today in the Washington Post and the Financial Times that the case for a carbon tax is “overwhelming” given the low price of gasoline. The average price per gallon in the U.S. is $2.20. Adding a $.25 tax would take it to $2.45.
“Doing that against a backdrop where gas prices have declined $1.50, it’s a very rare opportunity,” says energy and environment economist Michael Greenstone, the Milton Friedman professor at the University of Chicago. Even at the University of Chicago, a shrine to free-market theories, taxing carbon is a mainstream concept, Greenstone says.
“Drawing from the far right of the economics profession all the way to the far left, this is not a political issue,” Greenstone says. “This is blackboard economics.”
His point: The price of gasoline today is wrong. It does not include the cost of carbon-dioxide pollution from burning it. This is the baseline case for taxing carbon emissions.
Even if it’s good economics, it’s dismal politics. Republicans now control both houses of Congress. Still, former GOP Congressman Bob Inglis sees an opportunity: A carbon tax would bring in money, to cut other taxes. Say, corporate income taxes.
“This is an opportunity to change what we tax,” Inglis says. “To get off of income, and to get the tax on emissions. It certainly fits with what we as conservatives believe.”
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.