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The Power in the Carbon Tax

By John D. Dingell
Thursday, August 2, 2007

Successful laws to protect the environment are built on simple concepts. They discourage harmful behavior -- the dumping of sewage or industrial waste into bodies of water, the destruction of habitat, the emission of toxic chemicals -- by a variety of measures, all of which raise the cost of engaging in certain behavior. You can't develop land, and profit, if you're endangering a threatened animal. You have to dispose of chemical substances responsibly. And so on.

Good environmental law can also encourage good behavior: the development of alternative approaches, such as substances that cause less harm, or new technologies.

We should keep this in mind when discussing carbon. How do we raise the cost of emitting carbon, promoting conservation and efficiencies, and make alternatives more economically viable, thus addressing the problem of climate change?

Alternative energy sources -- those that are not carbon-based or substantially improve on (i.e., reduce) carbon emissions relative to the fuels we now consume -- are fairly well known: wind, biofuels (cellulosic ethanol, biodiesel), solar, waves, geothermal and nuclear.

Each source of energy faces obstacles. For example, wind and nuclear power present "not in my back yard" challenges, as we're seeing with efforts to install a wind farm off Cape Cod, Mass., while ethanol plants are welcomed with generous subsidies in the Farm Belt. Some raise issues regarding land use. All are more expensive to produce than the energy we currently use.

There is general agreement that we should devote more research and development funding to alternative energy and, in some cases, subsidize development. But there are limited dollars available and debates about the relative merits of each, rooted in regional differences.

I don't mean to dismiss improvements to existing technologies. The House Energy and Commerce Committee recently approved legislation to require 43 separate efficiency standards for appliances, buildings and more. When fully implemented, the standards will reduce carbon emissions by 8.6 billion tons, an amount equal to the annual emissions of all the cars on the road today. I have also endorsed a minimum 30 to 35 percent increase in vehicle fuel economy standards.

But to get the emissions reductions we need, we must do more.

I apparently created a mini-storm last month when I observed publicly for at least the sixth time since February that some form of carbon emissions fee or tax (including a gasoline tax) would be the most effective way to curb carbon emissions and make alternatives economically viable. I said, as I have on many occasions, that we would have to go to some kind of cap-and-trade system for carbon emissions.

A carbon tax or fee has been endorsed by President Bush's former chief economic adviser, Greg Mankiw; Nobel Prize-winning conservative economist Gary Becker; the chief executive of the largest U.S. auto-dealer chain, Mike Jackson; and several environmental organizations. From Alan Greenspan to Greenpeace, many recognize its utility.

There may be disagreements as to the proper level or the best use of revenue. The United Mine Workers support a fuel-based fee that would fund carbon sequestration. Others have suggested using the revenue to reduce Social Security taxes. Congress must hash out the details.

History shows that we respond to market forces. Between 1980 and 1981, the fuel economy of the vehicles Americans purchased increased 16 percent. That wasn't because of a technological breakthrough or a regulatory requirement. It was because the price of gas had risen to the point where consumers made fuel economy a priority. Market forces and mechanisms proved far more powerful than mandates.

I don't expect to overcome ideological Republican opposition to all forms of taxation, but if CEOs, economists, environmentalists and citizens speak out, we could effect real change. I don't pretend to speak for my party on this; I'm trying to speak to common sense and experience.

Former vice president Al Gore told the Energy and Commerce Committee this year: "We should start using the tax code to reduce taxes on employment and production, and make up the difference with pollution taxes, principally [on] CO2. Now I fully understand that this is considered politically impossible. But part of our challenge is to expand the limits of what's possible. Right now we are discouraging work and encouraging the destruction of the planet's habitability."

He's right. This Congress may be able to enact a cap-and-trade system, and other policies to address climate change, only without a carbon fee. Ultimately, though, we're going to have to be more ambitious.

The writer, a Democratic representative from Michigan, is chairman of the House Energy and Commerce Committee.

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