The moral case for fossil fuel taxes

Global oil #2

One of the downsides of working in policy is that you end up hearing the same arguments over and over again. So I was excited to read Oren Cass’ recent piece in City Journal, “The Carbon Tax Charade,” which at least develops a new angle on arguments against a carbon tax. Unfortunately, what the argument offers in originality it fails to match in persuasiveness.

In his article Cass offers a response to the recent announcement by a number of major oil and gas companies that they support a carbon tax. In response, he runs through a number of standard arguments about why this is not as surprising as it first seems (e.g., it’s really about hurting coal). But it is what follows these economic considerations, that Cass raises another benefit that oil and gas companies might get from a carbon tax: moral legitimacy. According to Cass, “paying the tax buys legal, economic and moral permission for the very activity that the tax is designed to discourage.”

Of course, oil and gas companies already have legal and economic permission to burn greenhouse gases. But what about moral permission? Here Cass relies on a famous study of Israeli day-cares which counterintuitively found that imposing a $15 charge on parents who were late in picking up their children actually increased the number of late pick-ups. Most speculate that the fine framed the decision as one of economics, rather than morality. When there was no fine, parents felt guilty about making the day care workers wait, and so worked harder to avoid that outcome. Once it was clear the day care was compensated for the extra time, the guilt was alleviated, which more than outweighed the disincentive of having to pay the fine.

According to Cass, the case of fossil fuel companies is not so different:

For energy producers, and all users of fossil fuels, a similar dynamic is at work. If a carbon tax is established at a price that economists and policymakers agree compensates society for the potential dangers of climate change, then anyone who wants to pay the price is implicitly welcome to emit the carbon dioxide.

Even Cass isn’t willing to argue that a carbon tax would result in higher carbon emissions. Unlike the decision of whether to rush to pick up your child from day care promptly, fossil fuel companies’ production decisions are already economic. They are businesses, after all. Nor is it necessarily the case that putting a fine or tax on an activity gives moral legitimacy to people who are wiling to pay it. If I get caught speeding, I’ll get a ticket. The fact that I pay the ticket doesn’t give me permission to speed. Higher taxes on cigarettes have gone hand-in-hand with increased social stigma for smoking.

However, my main rejoinder to Cass is that, even if carbon taxes did lend moral legitimacy to fossil fuel emissions, that wouldn’t be a bad thing. Burning fossil fuels isn’t evil. It isn’t like eating kittens, something that is just plain wrong and no one should do it ever. Energy is the foundation of modern civilization, and at least for the time being, there are many vital activities that can’t be done without some reliance on fossil fuels.

The problem with burning fossil fuels currently is that people who do it don’t bear the full cost of their actions. Since producers get the full benefit of burning fossil fuels, while bearing only some of the costs, we tend to burn too much of it. If a carbon tax is set at a level that compensates society for the potential dangers of climate change, then anyone who wants to pay the price should be welcome to emit carbon dioxide. To do otherwise would be to treat pollution not as an externality, but as a taboo.

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