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How Do You Pay for the War, Daddy?

NEW YORK (TheStreet) -- Today is Pearl Harbor Day. After the 1941 sneak attack by Japan America went to war, selling bonds to pay for it, paying off those bonds over time.

On Sept. 11, 2001, we were attacked again. We went to war. But we still have that war on our credit card. There has been no victory parade because we're still in Afghanistan. Even though it remains the elephant in the room when it comes to our national debt, no one is seriously talking about paying for it.

Currently, an "Iraq Cost Clock" puts the number at $827 billion, and climbing. Add in the cost of Afghanistan and you're talking over $1.4 trillion on the credit card.

That's why even conservatives like David Frum, writing at CNN, are now warming up to the idea of a "Carbon Tax." The New Yorker compares it to taxing alcohol or cigarettes, a "Pigouvian" tax (named for British economist Arthur Pigou) that recoups the unmet costs of a financial transaction.

The most important unmet cost of energy is global warming. After years of denialism, Hurricane Sandy brought this cost to Wall Street's door, or a down payment on it. California is already experimenting with a cap and trade system that goes into effect in January and is explained with charts by the Contra Costa Times.

A recent MIT study said a federal tax of $20/ton on carbon, rising at 4% per year, would raise $1.5 trillion over 10 years. I can get most of two wars for that.

What would a carbon tax mean for investors? Obviously you would sell coal and buy renewables, and favor natural gas over oil. General Electric (GE) just put an 18-month hold on a solar panel plant in Colorado, writes The Denver Post but still thinks solar energy will reach the same price as grid energy by 2016, according to Clean Technica..

That's without a carbon tax. With one, we might get there next year, and Aurora, Colo., might get a $300 million GE manufacturing plant.

This may be the most compelling argument for a carbon tax. If it's cheaper to put a solar panel on your home than buy electricity from the grid, you're going to do it. Hawaii has already passed grid parity, writes Solar Power World, leading to some fascinating political fights it might be fun to have in the rest of the country.

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