"Cap and trade was just one way of skinning the cat; it was not the only way,” Barack Obama declared after Democrats' disastrous losses in the 2010 midterm elections. That shellacking finally killed off the Waxman-Markey cap-and-trade bill. From it was born the EPA's Clean Power Plan and the Obama administration's war on coal, in turn a contributory factor to Donald Trump's election and Republicans' retaining control of the Senate. Now the grandees of the Old Republican Establishment, led by former secretaries of state George Shultz and James Baker, are calling for President Trump to put the new Republican majority at risk by enacting an escalating $40-per-ton carbon tax.
Where they are right is that a carbon tax is economically superior to cap-and-trade and EPA regulation. Their proposal addresses one of the big weaknesses of the latter two approaches by preventing “carbon leakage,” the migration of energy-intensive production to developing nations. It does this by reimbursing carbon taxes incurred in making goods for export while imposing a tax on imports from countries that did not price carbon, although it glosses over the vast expansion of the IRS that would be required to make such a system watertight.
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