Au Revoir, Carbon Tax

Jeff Witt /

As the Obama administration makes it clear they want to pursue a carbon capping policy to reduce greenhouse gas emissions, the French government announced that it would abandon plans to impose a similar carbon tax on domestic energy and transportation fuels.

The reason for the French government’s change of tune is obvious. Sarkozy’s party knows that the carbon tax, which would have raised gasoline prices by 17 cents per gallon and domestic gas bills by 7 percent, would have significantly harmed the intra-continental and international competitiveness of French businesses and would have raised considerably the cost of living for the French people. Indeed, Prime Minister Francois Fillon told fellow center-right politicians at a meeting on Tuesday that, “All decisions taken on the issue of sustainable development must be analyzed in the light of our competitiveness.” So, the move is designed to quell the evident consternation of the French people by adopting growth-inducing economic policies rather than growth-killing policies.

David Kreutzer, Research Fellow in Energy Economics and Climate Change, says a carbon tax is the most humane way to execute an innocent person. Taxing a substance that has debatable effects on climate change comes with a high price tag and will do little, if anything, to reduce global temperatures. France is already part of the European Union’s Emission Trading System (ETS), a multinational cap and trade program to reduce greenhouse emissions wrought with its own problems. The House of Representatives passed a cap and trade legislation last year in hopes that the Senate will act this year, but Europe’s experience suggests we should pull the reigns back. The Wall Street Journal details the fraud involved with Europe’s ETS.

Last week, spot trading on the ETS ground to a complete halt for three days after a scandal erupted over players gaming the system. In this case, the government of Hungary admitted to reselling “certified emission reduction” credits that companies had already relinquished, or “spent.” These credits mark out a project, such as reforesting, to counteract a company’s carbon emissions. Once such a CER has already been counted in the EU, regulators would prefer that it not be resold and, hence, risk being double-counted. By reselling the credits, the Hungarian government was, in effect, being rewarded for planting the same tree twice.

This is just the latest in a string of embarrassments that have plagued the system almost from the beginning. European authorities admitted last year that in certain countries, 90% of the trading volume was taken up by value-added tax fraud.”

Yet Carol Browner, the White House’s climate czar stressed that the government still stands adamantly behind carbon caps. She told a U.S. News & World Report energy forum, “It is our hope the Senate will act this year and we will do everything in our power to support that.”

Basic economic logic is universal, and the lesson of France applies equally to the United States: carbon taxes destroy wealth and jobs in an economy. And absent a compelling reason to intentionally hinder economic growth, such as a lack of conclusive evidence of anthropogenic global warming, governments should allow market forces to create jobs and grow the economy – what the American people really want to see.

And yet, even now as the international community grapples with the recent revelations of misinformation contained in the UN Intergovernmental Panel for Climate Change’s 2007 report that made the “unequivocal” case for man-made global warming, and as Americans find themselves still at the outset of an incipient economic recovery, Senators Kerry, Graham, and Lieberman are proposing legislation that would slap energy consumption taxes, sector by sector, on major portions of the American economy. The consequence of such a bill would be enormously negative for Americans.

Let’s give some credit to the French for their discursive (in both senses of the word) arrival at a good policy. And then let’s ourselves bid adieu to the idea of a carbon tax in any shape or form in America.

Jeff Witt, a member of the Young Leaders Program at the Heritage Foundation, co-authored this post.