For years, economists, politicians and pundits have been debating the pros and cons of using a “carbon tax” to combat climate change. In its simplest form, the tax would be a per-ton levy on carbon dioxide emissions from electric power stations and industrial boilers that are fueled by coal, oil or natural gas.
Those in favor argue that by adopting such a tax we could rid ourselves of dozens of burdensome regulations and mandates that inhibit investment and economic growth. Unlike the distorting effects of regulation, a tax on emissions would give companies flexibility to come up with their own cost-effective strategies for reducing CO2. Indeed, virtually all of the Environmental Protection Agency’s regulatory oversight over carbon emissions could eventually be eliminated as well as President Obama’s Clean Power Plan.
Opponents of a carbon tax make two basic arguments. The first is that a “tax is a tax,” and consumers and businesses who will ultimately bear the burden are already over-taxed. The second, and more salient argument against a carbon tax, is the difficulty in estimating the “social cost of carbon (SCC),” a necessary first step in determining the level of the tax. In theory, this term represents the economic cost caused by an additional ton of carbon dioxide emissions or its equivalent. Currently set at $36 per ton by the EPA, the social cost of carbon underpins justifications for policies dealing with everything from power plants to car mileage to refrigerator efficiency. In reality, the SCC is a malleable concept driven largely by analysts’ initial assumptions and the choice of model utilized to generate dollar estimates.
No rate hikes in the near future should have sent gold higher, but it didnt, gold dropped....
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