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New commentary by Monica Prasad in Politico about the benefits of a carbon tax over the Green New Deal. I really love some of Prasad's tax scholarship. But I think this argument is totally wrong. 1/ politico.com/agenda/story/2…
Her central thesis is that progressive are wrong to criticize carbon taxation. She argues that views on the policy instrument are distorted by economists inability to accurately model tax (environmental) benefits, instead focussing on tax (economic) costs 2/
She then cites Denmark as example of the power of carbon taxation to unleash change. I disagree. Danish environmental taxes were shaped by industrial lobbies, never threatened politically connected groups. Great book by Daugbjerg and Svendsen on this palgrave.com/us/book/978033… 3/
Instead, regulatory instruments in Scandinavia and across Europe were the real change drivers. And carbon tax revenues were never large enough to spark transformative change in the renewables sector. And this leads to the biggest problem...4/
It is precisely because economists are bad at calculating the benefits of carbon pricing, that the instrument is so flawed from a political economy perspective. It makes consumer costs very salient, and easy for opponents to highlight 5/
Ironically, her op-ed title: "All cost and no benefit" gives the formula explaining why ambitious carbon pricing has never succeeded. We might question the "All benefits and no cost" logic of Green New Deal rhetoric - but that is how you create a winning political coalition! 6/6
