Global Policy Forum

US Told Tax Can Control Warming


By Christine Tatum

Denver Post
May 31, 2004

In addition to oil prices hovering at record levels, some economists say a carbon tax would encourage Americans to curb wasteful energy consumption that contributes to global warming. Three prominent economists appearing here [Copenhagen, Denmark] for the global economics conference "Copenhagen Consensus" agreed that the chances of approving a carbon tax during an election year are slim. Consumers would face the tax at the gas pump.

Gas prices have risen steadily in Denver from about $1.50 a gallon in June to about $2.02 now. Americans wouldn't like the additional hike, but they must start thinking seriously about how to decrease greenhouse gas emissions, the economists said. If left unchecked, rising temperatures could have profound negative effects on agriculture around the world and decrease the global gross domestic product by billions of dollars each year, scientists say.

A carbon tax would be a more efficient means of addressing problems tied to global warming than many other measures that have won favor on the world stage, according to the economists: William Cline, a senior fellow at the Institute for International Economics and the Center for Global Development in Washington, D.C.; Harvard University professor Robert Mendelsohn; and Stanford University professor Alan Manne.

"There is a fundamental disconnect in the United States," Mendelsohn said. "Ask average Americans if they want to get rid of global warming, and many will say, 'Oh, yes.' But ask them if they'll give up their big cars and SUVs, and they'll say they couldn't do that. They need a little push." Opponents of carbon taxes contend they hurt businesses through reduced exports, especially of coal, and artificially add to the cost of economic production.

Americans' fuel consumption doesn't translate well around the world and is underscored by the United States' refusal to ratify the Kyoto Protocol, an international policy negotiated in 1997 to prevent climate change. The treaty sets limits on emissions of carbon dioxide for industrialized nations but makes no demands on developing countries. This month, Russia has hinted that it may ratify the protocol, which would put it into effect. The United States has consistently refused to join, in part because of the expense of drastic measures that would have to be implemented to meet the treaty's emissions standards and also because the treaty doesn't demand developing countries' compliance. "This is not just a problem for rich countries to pay to solve," Mendelsohn said.

While the men agree that a carbon tax would be one financially sound way to fight global warming, they disagree about how high the tax should be. Their differences largely stem from conflicting views about the damage global warming will cause over the next century. Cline claims that profound economic damages from global warming will be seen by 2050 and recommends a steep tax of $150 per ton of carbon - which he said would add roughly 45 cents to the cost of a gallon of gasoline. "We must develop a policy that sends a strong signal that carbon has a strong price attached to it," Cline said. "If we don't, we will not get a stimulus for technological and cultural change that are desperately needed to face the disastrous consequences of global warming head on."

Mendelsohn and Manne share far less dire views of the effects of global warming and propose carbon tax rates of $12 and $2 per ton, respectively. Both men said they would prefer to see the taxes rise as future generations determine a need for them. "We want to stop (global warming), but we don't need to tax ourselves to death today to do it," Mendelsohn said. "We want to give the people who come after us the flexibility to decide the policies that best suit their needs. "Greenhouse gas abatement is expensive and must be done efficiently - and we can all agree with that," he added.




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