The case for carbon taxes has long been compelling. With the recent steep fall in oil prices and associated declines in other energy prices, it has become overwhelming.
There is room for debate about the size of the tax and about how the proceeds should be deployed. But there should be no doubt that, given the current zero tax rate on carbon, increased taxation would be desirable.
The core of the case for taxation is the recognition that those who use carbon-based fuels or products do not bear all the costs of their actions.
Carbon emissions exacerbate global climate change. In many cases, they contribute to local pollution problems that harm human health.
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Getting fossil fuels out of the ground involves both accident risks and environmental challenges.
And even with the substantial recent increases in U.S. oil production, we remain a net importer. Any increase in our consumption raises our dependence on Middle East producers.
All of us, when we drive our cars, heat our homes or use fossil fuels in more indirect ways, create these costs without paying for them. It follows that we overuse these fuels.
Advocating a carbon tax is not some kind of argument for government planning; it is the logic of the market: That which is not paid for is overused.
Even if the government had no need or use for revenue, it could make the economy function better by levying carbon taxes.
While the recent decline in energy prices is a good thing in that it has, on balance, raised the incomes of Americans, it has also exacerbated the problem of energy overuse. The benefit of imposing carbon taxes is therefore enhanced.
On the other side of the ledger, there is the concern that a carbon tax would place an unfair burden on some middle- and low-income consumers.
Those who drive long distances to work, say, or who have homes that are expensive to heat would be disproportionately burdened.
Now that these consumers have received a windfall from the fall in energy prices, it would be possible to impose substantial carbon taxes without them being burdened relative to where things stood six months ago.
The price of gasoline has fallen by more than a dollar. A $25-a-ton tax on carbon that would raise far more than $1 trillion over the next decade would lift gasoline prices by only about 25 cents.
Some worry that taxing fossil fuels will hurt the competitiveness of U.S. industry and encourage offshoring.
In fact, a well-designed tax would be levied on the carbon content of all imports coming from countries that did not impose their own carbon levies. The United States can make the case that such a tax is compatible with World Trade Organization rules.
This approach would encourage countries who wished to avoid the U.S. tax to impose carbon taxes of their own, thereby further supporting efforts to reduce global climate change.
Progressives who are most concerned about climate change should rally to a carbon tax. Conservatives who believe in the power of markets should favor carbon taxes on market principles.
And Americans who want to see their country lead on the energy and climate issues that are crucial to the world should want to be in the vanguard on carbon taxes. Now is the time.
Lawrence Summers is a professor at and past president of Harvard University.