According to The Economist
This newspaper has long advocated a carbon tax as the best way to deal with a warming climate. This month we asked Cambridge Econometrics, an economic-modelling firm, to assess the impact of a carbon tax on the economy. To keep things simple and allow for gradual adjustment, we proposed that it should raise revenues equal to 1% of GDP by 2020, and that other policies with similar objectives (fuel duty, subsidies for renewable energy, Britain’s membership of the European emissions-trading scheme—the ETS—and so forth) would be abolished or cut back.
The results are surprising. A frequent worry about carbon taxes is that they will hurt business and the economy. But in our simulation Britain’s economic performance would improve. Despite raising an extra £11 billion in net revenue by 2015 and £18 billion by 2020, our carbon tax (£31 a tonne in 2015) would help economic performance, not hamper it. Output would be 1.2% higher by 2020 than under the current arrangements.
The principle—that polluters pay for the damage they cause—is easily grasped, and it is politically attractive to tax “bads” such as pollution instead of “goods” such as work and entrepreneurship.
A carbon tax would be good for the US economy, too. And making polluters pay for the damage they cause just seems common sense. If the public were allowed to consider the issue on its merits, minus the fog of lies from Rupert Murdoch, it would be politically popular with the majority of voters.
But the more important political question is — would a carbon tax help or hurt the profits of the most powerful US corporations? Given that a carbon tax is not a seriously considered option in the US, I’d guess that those corporations believe it would eat into their profits.
They might be wrong about that.