[jlgray]

An under-represented argument for a carbon tax is the fact that it would encourage companies to innovate, both with respect to efficiency as well as using renewable energy.

I predict that industries in countries that adopt a carbon tax earlier will end up with a competitive advantage.

[spodek]

I'll go further with the example of the U.S. car industry in the 60s, when the evidence was clear that consumers preferred safe, reliable, affordable, efficient cars -- from increasing sales for Volkswagen and Toyota, and most of all from the success of Unsafe at Any Speed.

I doubt anyone then would have predicted that two of the U.S. big three would declare bankruptcy and that Toyota, then manufacturer of podunk little cars, would become the #1 manufacturer, but it happened.

Had U.S. regulations met consumer demand, U.S. manufacturers may have innovated what consumers wanted instead of more chrome, tail fins, size, etc. Regulation came eventually, but too late for the industry to avoid bankruptcies, unemployment, and so on.

In fact, regulation didn't stifle innovation but directed it. Engineers can innovate around safety and efficiency as much as on speed and tail fins. I'd rather have 100,000 mile warranties and electric cars than more chrome, which U.S. market forces created.

Today, regarding the environment, the governments that regulate to reflect citizen demand for clean air, land, and water will create markets and companies that beat ones that don't. I hope current U.S. policy doesn't bankrupt more future U.S. markets and companies.