Why a national carbon tax is smart policy: SPEA dean outlines benefits in new book

BLOOMINGTON, Ind. -- Political conservatives may be wary of a national carbon tax, but John D. Graham contends there are several good reasons for Congress and the president to adopt the policy.

Graham, dean of the Indiana University School of Public and Environmental Affairs, outlines the case for the tax as a contributor to a new book, "Carbon Tax Policy: A Conservative Dialogue on Pro-Growth Opportunities." It was published by the Alliance for Market Solutions, an organization urging policymakers to consider what it calls pro-growth, conservative legislation that advances clean energy and reduces carbon pollution.

Graham, an expert in energy policy and administrator of the Office of Information and Regulatory Affairs in the George W. Bush administration, offers three primary arguments in favor of the national carbon tax:

  • The lack of a national tax invites state and local governments to adopt their own taxes, creating a patchwork of differing policies and forcing businesses to pay different amounts for their CO2 emissions in different regions of the countries. "That would undermine the efficiency advantages of the national approach and create uncertainty for investors in numerous sectors of the economy," Graham writes.
  • A national tax would reduce what Graham describes as the "regulatory seesaw" that results from changing presidential administrations. He notes the stark differences in carbon regulation between the Bush, Obama and Trump administrations. The regulatory uncertainty puts a burden on businesses as they make long-term planning and investment decisions.
  • Other regulations could be repealed or reconsidered if a national tax was adopted. Those could include the EPA's Clean Power Plan and the CAFE standards for fuel economy. Additionally, there is a potential cost savings as green energy subsidies could be eliminated. "A properly designed carbon tax pegged at the external social cost of carbon emissions would induce businesses to take the right steps without the need for other regulations," Graham writes.

Even as some regulations are removed from the books, other policies need to be maintained, Graham adds. That would include funding for research and development of new technologies such as carbon capture and storage systems. A carbon tax could result in a gap between the demand for cleaner technologies and the know-how that produces new systems and materials.

Other contributors to the book include Kristen Soltis Anderson, co-founder of the research firm Echelon Insights; Robert Carroll, a former high-ranking Treasury Department official in the George W. Bush administration; Aparna Mathur, a resident scholar at the American Enterprise Institute; Phillip Swagel of the University of Maryland; and Alan Viard, tax policy expert at the American Enterprise Institute and a former senior economist at the Federal Reserve Bank.

In addition to contributing to the book, Graham is a member of the Alliance for Market Solutions Board of Advisors.

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Jim Hanchett

School of Public and Environmental Affairs

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Email: jimhanch@indiana.edu

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