Tuesday, January 16, 2007

Carbon Tax Coming?

Jim Connaughton is not quite a member of the Pigou Club, but I would be happy to accept his application.

Here is what I read in yesterday's Washington Post:

On Saturday I put the case for a carbon tax or a cap-and-trade system to James Connaughton, the head of the Council on Environmental Quality at the White House. Far from denouncing these policies as eco-socialist nonsense, Connaughton sounded open to them. "In concept I can agree with you," he said. Something must be done to stem demand for climate-warming energy, and although there are several ways of getting there, a carbon tax or cap-and-trade system would be the most "elegant."

Whoa! This may be spin, but it's certainly new spin. Only a few months ago, Al Hubbard, director of Bush's National Economic Council, brushed aside the idea of a carbon tax: "The American people are not interested in paying more for gasoline," he told me, sounding like a frog in the path of a herd of elephants who says he's not interested in jumping.

I would bet against seeing any sensible increase in Pigovian taxation over the next two years, but if mainstream Republicans like Jim Connaughton appreciate the elegance of the idea, there is always hope.