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While any taxes are unpopular, there could be compromise embedded in such a tax, says Joseph Aldy, assistant professor of public policy at the Harvard Kennedy School who is affiliated with Resources for the Future. A carbon tax could help avoid less palatable alternatives such as eliminating mortgage interest deductions, but it also may mean Democrats would have to give up EPA's regulatory authority over greenhouse gases, he said.
“If a meaningful, economy-wide carbon tax can be established, then that reduces the need for greenhouse gas emission regulation,” Aldy said. “Both sides get an important component of a tax and fiscal reform package . . . the Republicans get regulatory streamlining, and the Democrats get a price on carbon.”
There is also speculation over whether Obama will make a push for stronger US climate policies, such as a national clean energy standard, requiring a certain percentage of power from renewable energy.
But some economists and academics say such changes may have a better shot if states continue to lead, although it will depend how well they do so. For example, the Northeast’s landmark Regional Greenhouse Gas Initiative, which set a gradually lowering cap on power plant emissions with the intent of driving up the cost of carbon emissions for operators, has not sparked the investment in pollution reduction first envisioned. Emissions have been markedly lower than forecast because of the recession, and low natural gas prices and a cap that was set very high also made the program less effective. However, a cap and trade program that is beginning in California could have a significant national impact, analysts say.