It's Just Another Tax, Folks

On 3/18 the WSJ reported that Energy Secretary Steven Chu "advocated adjusting trade duties as a 'weapon' to protect U.S. manufacturing". Basically, the threat is that we'll increase tariffs to protect energy-intensive industries where they compete with products coming from countries that don't apply a tax on CO2.

What interests me in this article and many others lately is that somehow a carbon tax (or cap and trade, there's little difference for most people in the economy other than how the price is set) is somehow different than just another tax. The WSJ would not bother with an oped titled "Major, New Economy Wide Tax May Hurt US Industry", but its news when it relates to CO2.

Recently I noted that the increase in gas prices from the CO2 tax levels that the Obama administration is signaling would be less than most states existing gas tax. China, on the other hand, currently has no gas tax. Where's the tariff discussion about that tax imbalance? Again, CO2 taxes are somehow different.

Maybe its the moral angle: "We're not taxing just to bring in money for the government, we're taxing because its our moral duty to do so to save the earth. So everyone else should have to as well." But of course that doesn't make it not a tax, and doesn't mean you get to avoid all of the other implications of a tax. And the fact that the Obama administration has built the revenue into their budget suggests that they're not going to balk at the revenue stream either.

Finally, the statements by Secretary Chu signal one more thing: the administration is waking up to the scale of impact that their proposed tax will have. As Roger Pielke, Jr noted, "One point seems clear: regardless of the reasoning a trade war means higher prices for the American consumer".