Can Taxing Pollution Pay For Infrastructure Improvements?

Nov 29, 2017

Rebuilding America’s infrastructure is an idea lots of politicians embrace. But how to pay for it can be tricky. Now, one Connecticut congressman is suggesting a possible solution: taxing pollution.

It’s called a carbon tax. And Democrat John Larson wants to use it to pay for a $1 trillion infrastructure program he’s pushing in the House.

“I think that anyone who looks at the revenue that a carbon tax can bring in -- and then how you apply that revenue -- can readily see solutions that everybody can get their arms around,” Larson said.  

The idea is this: tax polluters burning oil and gas so they pollute less. Air quality goes up, and money raised gets pumped back into infrastructure.

But if rebuilding roads and bridges is like political catnip, climate change policy can, at least for some, be a bit of a third rail.

“It’s virtually impossible to imagine meaningful climate action occurring without some substantial degree of Republican support,” said Jerry Taylor, with the Niskanen Center, a libertarian think tank.

Speaking at the Brookings Institution following a presentation by Larson, Taylor said he likes the Congressman's proposal. And that among debates in D.C. about tax reform, carbon pricing may, after decades, realize a “window of opportunity” as more congressional Republicans seem amenable to the idea.

“It gets right down to core identity issues,” Taylor said. “Milton Friedman argued if you have a pollution issue, the most efficient way of addressing it, is just to tax pollution. And then let market signals guide individual entrepreneurs and consumers to decide when, where, and how to reduce emissions. Rather than going to regulators.”

Oil giants like Shell, BP, and ExxonMobil have voiced support for a carbon tax. But the idea has been criticized too, for potentially raising the cost of fuel, which could impact low-income Americans more acutely.

Still, amid climate change denial from party leaders like Donald Trump, taxing emissions could be a tough sell in the near future.

“I think in the long haul, I’m fairly optimistic,” Taylor said. “It’s easy to lose sight of how difficult it is to enact major change in Congress. It takes long, constant, steady work.”