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The semantics of green legislation

December 28, 2009


Most analysts would agree that a carbon tax, as opposed to a cap-and-trade program, represents a more direct and manageable scheme for reducing greenhouse gas emissions.

A carbon tax in the U.S., however, comes with one major disadvantage—the practical challenge of enacting tax legislation, especially in a recession cycle that features unstable energy prices.

Ironically, the transparency and easy implementation of a carbon tax serve to undermine its political attractiveness. A carbon tax makes it clear that society is paying the costs of carbon pollution, and the very word “tax” raises American hackles.

Cap-and-trade, on the other hand, has the word “Trade” in it—that doesn’t sound so bad, right?

For proponents of a carbon tax, then, a big challenge is to recast the tax program as one that can gain popular and political support. Many tax-like programs, for example, seek to manipulate public perception by avoiding the word tax.

In Seattle, for instance, what amounts to a 20 cent tax on plastic grocery bags is called an “advance disposal fee.” California and Oregon collect a “system benefit charge” as part of utility bills. Suspiciously tax-like, the fee in CA is a small monthly surcharge that is redistributed to finance governmentally favored cleantech programs.

Alternatively, some taxes have been made palatable by characterizing them as “sin taxes.” Assumably, people agree with tapping revenue from a “public bad” (tobacco) and shifting it to a “public good” (cancer research and health care).

Carbon tax proponents are catching on. James Hansen, NASA climatologist and vocal opponent of cap-and-trade programs, recently proposed in the NY Times a “fee and dividend” system.

Without mentioning the word “tax,” the proposal would impose a gradually rising fee to be collected at the mine or port of entry for fossil fuels. The fee would raise the price of goods but would also be redistributed as dividends to individuals in proportion to their reduction in carbon emissions. All the while, cleantech industries would be supported by becoming more cost-competitive with traditional fossil fuels.

That has a nice ring to it.

Source: Alex Kerr

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