It’s Never a Good Time for a Carbon Tax

◼ Larry Summers, former treasury secretary and economic advisor to the Obama administration, says low oil prices offer a ripe opportunity to impose a carbon tax. Writing in the Washington Post, Summers argues that conservatives “who believe in the power of markets should favor carbon taxes on market principles.” - Daily Signal

We have no idea, of course, how long oil prices will remain low. But it doesn’t matter. Cheap oil is no excuse for bad policy. A carbon tax is not a market-based policy and will be a huge economic loser without making a dent in global warming....

Although Summers has argued for a carbon tax when oil prices were high, part of Summers’ argument in his most recent op-ed is that Americans can now afford a carbon tax. He writes:

“Those who drive long distances to work, say, or who have homes that are expensive to heat would be disproportionately burdened. Now that these consumers have received a windfall from the fall in energy prices, it would be possible to impose substantial carbon taxes without them being burdened relative to where things stood six months ago.”

Summers significantly downplays the damage a carbon tax would impose. Levying a price on carbon dioxide will directly raise the cost of electricity, gasoline, diesel fuel and home heating oil. An overwhelming majority of America’s energy needs are met by carbon-emitting conventional fuels. And since low-income families spend a larger proportion of their income on energy, a tax that increases energy prices would disproportionately affect the budgets of the poorest American families.

The direct hit is just a small part of the story. Energy is a necessary component for just about all of the goods and services consumed, so Americans will pay more for food, healthcare, education, clothes, cleaning supplies – you name it. A carbon tax would act as a vise – squeezing both the production and consumption ends of the economy....