“There is a broad consensus in favor of a carbon tax everywhere except on Capitol Hill, where the ‘T word’ is anathema.” So says the conservative American Enterprise Institute. The conflict between the antitax politics and the consensus creates a tension at the heart of energy policy. Capitol Hill politicians have blocked the world’s best energy policy with antitax slogans.*
A carbon untax breaks the deadlock by dividing the carbon tax into two steps and fixing the expensive step. The first step of a carbon tax collects the money, and the second step gives it to the government. The first step, collecting the money, makes the carbon tax work and is the reason for the broad consensus. Collecting the carbon charge discourages fossil-fuel use. The untax does this, but it replaces the second step, “give it to the government,” with “give it back.” That’s so different that I cannot call the untax a tax. The whole point of a tax is to collect money for the government.
The simplicity of the untax hides a number of puzzling subtleties. If consumers pay all the costs and receive all the refunds, why does it work? If it refunds 100 percent of what it collects, isn’t it free? If it’s free, how can it possibly be a powerful method of moving society away from fossil fuels? And if it has hidden costs, won’t it be unfair to the poor? I will explain the basic workings of the carbon untax and then consider these mysteries one by one, though I leave the question of fairness for Chapter 18.
