Adele Morris at Tax Vox:
The U.S. Environmental Protection Agency (EPA) is developing a proposed rule due out in June that could allow states to use carbon excise taxes or fees to limit the one-third of U.S. greenhouse gas emissions that come from power plants. The tax approach, one of several options EPA could offer states, could provide an important test for price-based limits on climate-changing activities.
A national price on carbon currently has little traction in Washington, but EPA’s power plant rule could open the door for a straightforward state-based tax. EPA just needs to set a minimum tax trajectory that any state could adopt. Here are some potential benefits to such a system ...
Here are two of the 10+ reasons why this would be a good idea:
- A carbon fee discourages each fuel’s use in exact proportion to its damage to the climate. This changes the relative prices of different fuels and encourages all pollution reductions that cost less than the tax. EPA can set a tax that reflects the Administration’s estimates of the damages of the pollution.
- States could use the revenue however they wish. For instance, they could lower inefficient taxes, potentially providing pro-growth state tax reform along with environmental benefits.