Most people are willing to sacrifice something to help the environment. But different choices make different impacts. Not eating meat would do more to help cut carbon emissions than recycling, reusing plastic bags, and riding your bike to work everyday. Most omnivores wouldn’t give up their meaty diets.┬áSUVs are often a target of people dedicated to improving the environment. Often ridiculed as being impractical, SUVs can easily be substituted with more fuel efficient cars. But are people willing to give up their dogs – perhaps more detrimental than SUVs – in order to help the environment? I’m going to guess the answer is no.

I know, it might sound weird coming from someone who really doesn’t like taxes, especially taxes that are passed-off as “well-intentioned”. The British government is calling for a raise in taxes on motorists to cut carbon emissions and I personally support the move.

Taxes on gasoline are an economically justified and effective way of correcting a harmful externality (CO2 emissions) by accounting for the social cost of gasoline consumption. A gasoline tax, for this purpose – and not for the purpose of raising revenues – is an example of a Pigouvian tax.

A Pigouvian tax – named after Arthur Pigou and championed most recently and enthusiastically by Greg Mankiw – is a tax that corrects externalities by making it more costly to participate in the said action. Pigouvian taxes are meant to be revenue neutral by being enacted side-by-side with an equivalent tax cut in another area.

Whether this proposal by the British government is a Pigouvian tax or just an outright tax increase remains to be seen. As long as it is Pigouvian, I throw my hesitant support behind it.