Horse race update: Christopher Dodd proposes carbon tax

chrisdodd.jpgSenator and presidential wannabe Chris Dodd recently endorsed a corporate carbon tax. So far, proposed carbon legislation in the U.S. has focused exclusively on cap-and-trade. Dodd is the first candidate to come out in favor of a tax instead.

Or rather, in favor of both. Dodd wants a tax on top of a cap-and-trade system. Purists will complain that a hybrid approach is redundant. Both types of legislation are designed to meet the same end, through roughly similar means: putting a price on carbon.

But I’m not a purist. Carbon taxes and cap-and-trade have complementary strengths and weaknesses, so perhaps the two together can add up to more than the sum of their parts. Dodd seems to be alluding to one of the weaknesses of cap-and-trade — the potential for polluters to game the system — when he says, “We all know no matter how tough the rules, some large polluting companies will always be able to buy their way out from underneath them.”

Another unusual feature of Dodd’s tax proposal is that it doesn’t call for offsetting tax cuts. Usually politicians seek to blunt objections to a carbon tax by making it revenue neutral. But Dodd wants the government to keep the money and plow it back into clean energy development.

Dodd has a complete energy independence plan that calls for cutting carbon emissions 80% by 2050. Although some of the plan contains the usual red herrings — more money for farmers, a nonsensical pledge to end our dependence on “Middle East Oil” — it’s generally pretty subtantive.

Of course, Dodd is not a serious contender for the presidency. The role of his candidacy is to broaden the debate and advocate for policies, something which he appears to be doing quite well.

In other horse race news, McCain delivered his big energy speech today. More on that in a later post.

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  1. Pam Hendrix - April 25, 2007

    I’m going to be watching Sen. Dodd now; I think he is on the right track. Charging for consumption is the way to go. Hitting people in the pocketbook works every time. I am an advocate of a consumption-use tax rather than the income tax we have now. I also say that if we really want people to start building smaller, more energy-efficient homes and drive more energy-efficient cars, then we need to charge based on how much electricity, gas or water they use. The cost for minimal usage could be low, then anything more than that subject to a tenfold or hundredfold increase. I think you would see smaller homes and more efficient cars overnight. Why hasn’t this idea caught on? Of course, I don’t want the gas and electric companies to just pocket the extra profits. The extra money collected should go to improving the overall industry efficiency. It seems like a win-win to me.