The Kansas Coal Carbon Tax Caper

Michael Giberson

On Monday night, Republicans in the Kansas House voted to apply a tax of $37 per ton of CO2 emitted from coal fired power plants for emissions in excess of 110 percent of the statewide average. Proceeds from the tax would be distributed to the large coal plants in the state with the lowest average carbon emissions.

The Salina Journal quoted Rep. Clay Aurand, R-Courtland, as saying, “This is like a giant race to be the cleanest.”

Only, as written, the tax would apply to a single power plant in the state, one owned by the Kansas City Board of Public Utilities, and the money would flow to one or more of the competing coal-fired generators owned by Westar Energy, Kansas City Power Light and Sunflower Electric. Generators with much lower emission rates, which includes just about everything from gas-fueled generators to nuclear power to wind power, would neither be taxed or subsidized. Some members of the Kansas House saw the proposal as an attempt to punish opponents of proposed coal-fired power plants in western Kansas.

Not exactly the approach the members of the Pigou Club have in mind.

Apparently on Tuesday morning Kansas House Republicans reconsidered their enthusiasm for carbon taxing, and voted to eliminate the carbon tax proposal.

Pigovian taxes are great in theory, but even in theory sometimes quantity regulation is preferred. And, of course, in practice both price- and quantity-based regulation will be shaped by lobbyists and politicians, perhaps motivated by factors beyond pure economic efficiency. Economist-advocates should mind the gap between theory and practice; the Kansas coal carbon tax caper provides an illustrative example.

(HT the Carbon Tax Center blog.)