Question
In 2016, voters in the state of Washington rejected a ballot initiative aimed at creating a new statewide tax on carbon emissions. The text of
In 2016, voters in the state of Washington rejected a ballot initiative aimed at creating a new statewide tax on carbon emissions. The text of Washington Initiative 732 is reproduced below: "This measure would impose a carbon emission tax on the sale or use of certain fossil fuels and fossil-fuel-generated electricity, at $15 per metric ton of carbon dioxide in 2017, and increasing gradually to $100 per metric ton (2016 dollars adjusted for inflation), with more gradual phase-in for some users. It would reduce the sales tax rate by one percentage point over two years, increase a low-income sales tax exemption, and reduce certain manufacturing taxes." a. Describe the market failure that the carbon tax aims to address. Is it appropriate for state governments to address this challenge given the scope of this market failure? Why or why not?
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