Frank Bernheisel: The View From Here
Frank Bernheisel
Frank Bernheisel
Posted 06.24.10
Just Outside Washington


Pass a carbon tax

Dear President Obama,

In your speech last week, you suggested that Americans need to reduce our dependence on oil, and foreign oil specifically. This is beyond doubt and there are many ideas, including T. Boone Pickens' conversion of vehicles to natural gas.

In my field of solid waste, we are putting about 230 million tons of material in holes in the ground called landfills. This is the equivalent of approximately 209 million barrels of oil per year.

If burned in a waste to energy plant, this waste would generate about 125 billion KWHr of electricity. Waste-to-energy facilities meet high emissions standards and are extremely hard to develop and make competitive with landfills.

My approach to converting America to alternative forms of energy is to enable the market to sort it all out. However, the market needs some help.

Currently, we have all types of interventions in the market from tax credits for individuals for solar panels to a favorable income tax rate for oil companies, which are supposed to do good things.

These distort the market.

Therefore, first remove all subsidies and favorable tax treatments for all forms of energy. Second, tax carbon emissions. Do not implement cap and trade, which requires a lot of overhead and is subject to fraud.

Clearly, a big carbon tax would be very disruptive to the economy, as would a big change in the tax structure. Therefore, these measures would need to be enacted and then implemented over time.

The carbon tax should take effect immediately and initially produce a 50 cent per gallon increase in the price of gasoline and diesel fuel.

Then the carbon tax should ramp up over ten years to result in $7 a gallon gasoline in today's dollars.

The ramp up of the carbon tax gives individuals and industry time to plan and adjust their investment policies. The higher the carbon emissions, the higher the tax.

When goods are imported from countries with high carbon emitting industries, the imbedded carbon in those goods should be taxed to adjust the price of the goods so that there is no advantage to polluting. This would level the playing field for US goods.

An additional and major benefit of the carbon tax would be the additional tax revenue generated. This could be used to fund rebuilding of the American infrastructure and pay down the national debt.

Frank Bernheisel