He Can’t Know

by Don Boudreaux on August 31, 2010

in Energy, Environment, Hubris and humility, Taxes

Here’s a letter to the Wall Street Journal:

Alexander Koukoulas repeats the familiar assertion that “Today’s power rates do not include the environmental costs associated with fossil-fuel extraction, the burning of these fuels and their production of greenhouse gases” (Letters, Aug. 30).

Perhaps.  But perhaps not.  Fossil-fuel production and consumption are taxed quite heavily.  As found by Scott Hodge of the nonpartisan Tax Foundation, in 2008 the oil industry alone paid more than $90 billion in taxes worldwide.  And between 1981 and 2008, taxes paid by this industry totaled nearly $2 trillion, an amount that exceeds oil-industry profits during these same years by almost 40 percent.  The production and use of coal is also heavily taxed.

It’s not at all clear that these taxes do not now push power rates up to levels “that include the environmental costs associated with fossil-fuel extraction, the burning of these fuels and their production of greenhouse gases.”  Indeed, in light of the enormous (and often overlooked) benefits that people worldwide derive from fossil-fuels, it’s quite possible that these taxes push power rates to levels that are too high.

Sincerely,
Donald J. Boudreaux

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