A carbon audit of the tax code

U.S. Senator Max Baucus has introduced legislation with a number of interesting themes. We welcome his proposals on taxing hedge funds (or, to put it another way, curbing the tax subsidies enjoyed by hedge funds), which would raise over $50 billion over the next decade.

One of Baucus' interesting proposals is for a carbon audit of the tax code. As Congressman Earl Blumenauer described an earlier congressional version:

"The Carbon Audit of the United States Tax Code by the National Academy of Sciences would involve a review of the tax code to identify those tax provisions and policies that have the greatest influence on the generation of carbon emissions and other greenhouse gases and to estimate the magnitude of those effects. The study would evaluate the potential for changes in the tax code to reduce carbon emissions. The study will examine areas where the connection between the tax code and carbon emissions are obvious (e.g., energy taxation) and will consider areas where the connection between the tax code and carbon emissions may be less obvious (e.g., tax policies affecting urban development, which affect climate through travel demand and land-use change)."

This is highly sensible. Countries around the world should urgently take note.