A Carbon Tax Cut

Expectations are low for Obama’s climate speech tomorrow. If I were Obama, here’s how I would “go big“:

1) Instruct the EPA to set up a cap-and-trade system, similar to their successful sulfur dioxide market. The Supreme Court affirmed that the EPA had the authority to set up such a system in 2007. Conservatives will hate this program, and it would divide the country, so I recommend that Obama gives himself the following “out”:

2) Propose that if Congress passes a Carbon Tax Cut plan (i.e., a Tax-and-Dividend plan re-branded as a “tax cut” because no one knows what a “dividend” is) by January 1, 2015, then the EPA will drop its cap-and-trade rule in favor of Congress’s action. Let the Republicans in the House stand in between Americans and a bigger tax rebate check. Let Republicans stand on the side of Big Oil and against Americans “keeping more of their money” (as Republicans are want to argue). Further, the 2015 deadline allow Congress to pass the law in the lame duck session, which is the one time when plenty gets done on the Hill.

The worst that could happen for Obama is that Congress gridlocks on the tax cut and he is saddled with the cap-and-trade program. Since Obama doesn’t have to run for re-election, that’s hardly a big deal. Candidates in 2014 can run on the tax cut, and presidential candidates in 2016 can run against Republicans who voted against the tax cut.

The worst that could happen for the country is that Congress passes a meek Carbon Tax Cut that only nicks the bottom line of carbon-spewing companies. However, once the program is in place, it’ll be easier to expand it (like fuel economy standards over the years), especially since expansion means larger rebates for Americans.

I think the upside for the world, on the other hand, would be substantial. So, go big, Obama!

(I realize that the world is much more complicated than this blog post, that rules take a long time to implement, and are often challenged in court. A realpolitik approach would be to direct the EPA to quickly promulgate a few regulations less complicated than the full cap-and-trade system that would go into effect Jan 1, 2015. Hopefully fear of those regs would still compel industry to push Congress to act.)

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