Legislative Sunrises: Transitions, Veiled Commitments, and Carbon Taxes

Abstract

Time is a lawmaking tool, and one that is available to all lawmakers. New law can be applied retroactively or prospectively, and it can be done so with a vengeance; a statute or judicial decision might apply only to events that took place before some past date or only to transactions in the distant future. This last category is loosely described as "sunrise," in order to contrast it with sunset legislation and its strategy of scheduled demise. Sunrises may be used to facilitate transitions, anticipate future circumstances, overcome political opposition, or simply try and bind political successors – though they can always repeal the statute. Sunrising is "partial" inasmuch as benefits are deferred more than costs, or the other way around. An efficient sunrise generally incurs costs today, or in the near-distant future, in exchange for benefits well beyond its horizon. Some of the most promising proposals with respect to climate change have this feature. The current generation volunteers to absorb burdens in order to lessen the probability of future disasters. Once these burdens are absorbed, the next generation is likely to continue on this path either because marginal costs of completion are now lower or simply because the sunk costs are seductively followed. A leap of faith is needed to believe that the early volunteers chose a path worth following.

Keywords: timing rules, sunrises, transitions, carbon taxes

JEL Classification: D72, K34