The perm links to the net benefit---the absence of federal action makes state action substantively and symbolically important

As we noted in our first article, the general consensus among economists and other commentators is that a carbon tax would (theoretically) be superior to a cap-and-trade regime. However, there is also a general consensus that a single state cannot (practically) impose a significant carbon tax because a single state cannot impose border tax adjustments. Border tax adjustments are crucial because a carbon tax in one state would make products in that state more expensive, particularly energy-intensive products such as concrete. Thus, if consumers or businesses could just import those products from other states, a carbon tax in one state would accomplish little except to harm that state’s domestic industries. That problem could be solved if a state could impose a surcharge on out-of-state imports to make up for the tax on domestic producers. But the general consensus is that this sort of surcharge would clearly violate the Constitution’s dormant commerce clause, effectively taking that solution off the table. Nevertheless, in this article and in the one that follows, we will argue against that general consensus.2 Specifically, we will explain how a well-designed state level carbon tax with border tax adjustments could pass constitutional muster. To be sure, this is both the worst of times and the best of times for a state to consider imposing a carbon tax. It is the worst of times because there is little prospect that a successful state carbon tax might, once so proven, then soon be adopted at the national level. Indeed, there is unlikely to be much — if any — pressure on the states to reduce their greenhouse gas emissions from the federal government. Yet it is also the best of times because the likely absence of federal action makes state action more important, both substantively and symbolically. In other words, because the federal government will not be riding to the rescue anytime soon, we must hope that the states’ laboratories of democracy are up to the task of saving the world.