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Environmental Mandates Versus Carbon Taxes

Via Kevin Drum, Mark Thoma has an interesting post asking the question: If it's universally acknowledged that carbon taxes are a better means of fighting global warming than clunky mandates like CAFE standards, why is it that mandates seem to have far more political viability? Mark thinks it might have to do with concerns about equity:

I don't think policies that allow certain segment of the population to "buy out" of the constraint will find much popular support. If the poor are passed by roaring, gas guzzling, sports cars on the freeway as they drive their gas saving, small hybrid, they won't feel that is fair, not unless our transportation infrastructure changes dramatically. ... A mandate, done properly, may have poor economic properties, but I think people support them because at least there's a chance that a mandate will force the luxury cars to abide by the same mpg restrictions as the lower price cars driven by the typical household.

There could be something to this, although it seems like a bad idea to use climate-change policy as a vehicle for redistribution. But I think the real explanation is simpler: politicians are loath to vote for a carbon tax because it's easier for their opponents to blame them when people are forced to make lifestyle changes. (Which also explains why a cap-and-trade system is more attractive to politicians than a carbon tax.) What frightens the average voter isn't the thought that fat cats might still be able to drive around in Hummers--it's the thought that they might have to give up their own beloved vehicles for more fuel-efficient models. Now, of course, things like CAFE mandates have the practical effect of forcing them to do this. But most folks aren't quite that rational: because the effect is further removed from the vote in Congress, it's all but impossible to pin the blame on the political system--so representatives feel like they can cast a vote for the environment without forcing voters to confront trade-offs. So we wind up with policies that everyone agrees are inferior to the alternative of a carbon tax.

The blame, I'd suggest, lies primarily with opponents of a carbon tax. Presumably, the ideal outcome for carbon-tax opponents would be to have neither a carbon tax nor environmental mandates. But that isn't an option: it's clear that there's enough political support for global-warming mitigation--it just happens that the political support is for the (relatively) economically inefficient kind of global-warming mitigation. If they genuinely cared about implementing a sound climate-change policy, carbon-tax opponents at this point would relent, since the alternative is a set of policies--environmental mandates--that they claim to like even less. But, as Kevin notes, a lot of carbon-tax opponents are more concerned with pushing broader ideological agendas.

--Josh Patashnik