The Case for Taxes

Lurking in this New York Times article about "solar thermal" power is a good reason to prefer straightforward carbon taxes to more complicated subsidy schemes as a way of generating cleaner power:

In the solar thermal variant, heat from the sun is used to preheat the water that the exhaust gases will boil into steam. Proponents say that such a system could get about one-sixth more work out of the natural gas by operating at 70 percent efficiency. Most current plants operate with efficiencies in the range of 50 to 60 percent.

The World Bank is considering financial help for projects in Egypt and Morocco that would create such a hybrid. In the United States, such systems are not practical because they would lose the tax benefits that the federal government gives solar projects.



And there's the rub. Part of the genius of a carbon tax is that it creates incentives for more green friendly power at the margin, so that something like this which produces meaningful carbon reductions is rewarded precisely in proportion to the extent to which it does, in fact, reduce emissions. Right now, our subsidy scheme doesn't reward companies at all for adopting this sort of technology. But changing the scheme to make these plants eligible for the solar subsidies would be bad, too, since a mixed plant isn't nearly as clean as a true solar one.