June 21, 2007

When Taxes Fail

Matthew Yglesias has a good post on why, when it comes to reducing CO2 emissions, carbon taxes are preferable on the merits to "command and control" type solutions (i.e., renewable fuel mandates or stricter fuel-economy standards). I'd endorse most of what he says, with one big caveat.

At some point soon, the United States is going to need to help curb emissions growth around the world--at least if we care about fending off drastic climate change--and that means finding an approach that can be put into world-treaty form. It's going to be very difficult to harmonize and coordinate carbon-tax regimes across the globe, not least because, well, many countries are corrupt. On the other hand, standards for, say, fuel-efficient cars can probably be universalized more easily. (It seems simpler to draft a treaty ensuring that all new cars get such and such mileage than it is to persuade every nation to levy higher gas taxes, no?)

As I understand it, that was the idea behind the Montreal Protocol--the world's nations got together and agreed to set standards for certain appliances, rather than trying to set a international tax on CFCs (or some other complex emissions-trading scheme). And it worked well. Maybe I'm overestimating the difficulty of creating a global tax (or cap-and-trade) regime, but that's one area in which some non-tax approaches might be superior on the merits.
-- Brad Plumer 3:02 PM || ||