A Libertarian Argues for a Carbon Tax


If emissions result in property damage, who should pay?

I posted earlier today an item about a recent meeting held at the think tank, the American Enterprise Institute, between conservative and progressive policy wonks to talk about a carbon tax as way to address the problem of man-made global warming. The Competitive Enterprise Institute's Myron Ebell decried any discussion by conservatives of a carbon tax as "political poison."

Case Western Reserve University law professor Jonathan Adler (who is former CEI staffer and a friend) emailed to remind me that some libertarians are concerned about the property rights implications of man-made global warming and how to redress the damage being caused to third parties by emitting carbon dioxide. Back in May, over at the Altantic Monthly blog, Adler wrote:

My argument is that the same general principles that lead libertarians and conservatives to call for greater protection of property rights should lead them to call for greater attention to the most likely effects of climate change.  It is a well recognized principle of common law that if company A is flooding the land of person B, it is irrelevant whether company A generates lots of economic prosperity for the local community (including B).  A's action would still violate B's property rights, and B would be entitled to relief of some sort.  By the same token, if the land of a farmer in Bangladesh is flooded, due in measurable and provable part to human-induced climate change, why would he be any less entitled to redress than a farmer who has his land flooded by his neighbor's land-use changes? Property rights should not be sacrificed as part of some utilitarian calculus.  Libertarians readily accept this principle when government planners violate property rights in the name of economic development (see e.g., Kelo v. New London).  Yet they seem to abandon their commitment to property rights when it comes to global warming.

I readily recognize that there is, as yet, no international mechanism that adjudicate warming-based disputes, and I am quite sympathetic to those who believe any international entity capable of adjudicating such disputes would do more harm than good, but this does not negate the principle that global warming is, as best we can tell, likely to cause harms that should be addressed.  The question is how to do it.

Adler goes on to discuss various policy proposals including R&D prizes for developing low-carbon energy technologies, the removal of regulatory barriers for deploying new energy production technologies, and the development of markets, say in water, to enable people to adapt more easily to climate change. He then argues for a carbon tax:

I believe the United States should adopt a revenue-neutral carbon tax, much like that suggested by NASA's James Hansen.  Specifically, the federal government should impose a price on carbon that is fully rebated to taxpayers on a per capita basis.  This would, in effect, shift the incidence of federal taxes away from income and labor and onto energy consumption and offset some of the potential regressivity of a carbon tax.  For conservatives who have long supported shifting from an income tax to a sales or consumption tax, and oppose increasing the federal tax burden, this should be a no brainer.  If fully rebated, there is no need to worry about whether the government will put the resulting revenues to good use, but the tax would provide a significant incentive to reduce carbon energy use.  Further, a carbon tax would be more transparent and less vulnerable to rent-seeking and special interest mischief than equivalent cap-and-trade schemes and would also be easier to account for within the global trading system.  All this means a revenue-neutral carbon tax could be easier to enact than cap-and-trade.  And as for a broader theoretical justification, if the global atmosphere is a global commons owned by us all, why should not those who use this commons to dispose of their carbon emissions pay a user fee to compensate those who are affected.

Adler is no fool. Discuss amongst yourselves.