The world believes that the only thing Americans care about is cheap oil. Prove them wrong.

By Kenneth Rogoff

Future historians will almost certainly regard the failure of the United States to lead in global environmental policy as an even greater mistake than the invasion of Iraq. The first thing the next American president should do upon taking office is to insist that the U.S. Congress pass a huge increase in gas taxes. To be more precise, the United States should implement steep carbon taxes that hit coal, heating oil, and natural gas. The tax should be enough to raise the price of gasoline by at least $2 a gallon. But unlike Europe’s consumer-oriented gasoline tax, it should hit everyone in the economy, including manufacturers.

No other specific policy action will be half as effective in changing America’s engagement with the world. No other presidential directive would so clearly disown the United States’ record of lamentable and self-centered head-in-the-sand energy policies. There is no way the United States can hope to persuade China and India to adopt more environmentally friendly growth strategies without first acknowledging its own responsibility—and then doing something about it. At the same time, a carbon tax might finally convince the rest of the world that the United States does not aim to invade countries to preserve cheap oil.

Such a tax would raise massive revenues that will help reduce current and prospective U.S. deficits. The revenues would help ease the pressure that excessive American borrowing is putting on international capital markets, pressure that is now contributing to a dangerous collapse of the dollar. Of...