Do carbon taxes hit oil producers?

If they do, we can make the Saudis and the Russians carry part of our tax burden. Wouldn’t that be lovely?

Yes, a carbon tax or a cap-and-trade system with the permits auctioned off rather than given away would raise a boatload of revenue, even after some of the money is redistributed back to lower-income families to hold them harmless. But here’s a question for my economist readers:

To what extent would the incidence of a carbon tax fall on sellers of crude oil? That is, to what extent can we shift the tax burden from U.S. taxpayers to the Saudi royal family, the Russian oligarchs, and ExxonMobil? The simple version of the argument is that the market will drive the price of oil to the point where the quantity demanded equals the quantity supplied. We’ve already seen how unresponsive supply is even to quite massive price increases. Thus a tax on crude production &#8212 including the part of a carbon or GHG tax that covered oil &#8212 would be largely borne by the sellers.

Not only would this be a strong policy argument for such a tax, it would be an overwhelmingly strong political argument. Now all I need to know is to what extent that argument has the additional advantage of being true.

h/t Kevin Drum, via Matt Yglesias.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: