1. Even if we cut government spending a lot, some taxes will have to go up. This seems like the least bad tax to raise or create, since it has some chance of producing a better outcome. It’s hard to say that about most of the other potential tax boosts. I’d also cut the tax deduction for mortgage interest, of course. That too could improve the quality of outcomes.
3. A carbon tax might lead to a new green technology, with high upfront costs and low marginal costs. Some of the rest of the world might then adopt the technology, even if those countries don’t ever adopt a carbon tax. In the short run this seems a little pie-in-the-sky, but in the longer run is it so crazy? Haven’t the Chinese adopted most of our other technological innovations?
I didn’t include Cowen’s second argument, as it involves a deontelogical libertarianism that I don’t buy into. So instead I’ll add my own, out of order, argument two:
2. Regulation of carbon emissions will happen with or without cap and trade. The Supreme Court ruled a couple of years ago that the EPA must regulate carbon emissions as a pollutant, so the choice is not between regulation and no regulation but between cap and trade and whatever the EPA comes up with. My guess is that conservatives would like cap and trade better than an EPA imposed regime.