Why the climate needs a carbon tax in 2013

Last updated on 9 January 2013, 11:09 am

A few days ago on this website, you might have read Chevron CEO John Watson’s comment that a carbon tax would be bad for the US economy.

Unfortunately, nothing could be further from the truth. A carbon tax would have a profoundly positive impact on the US economy.

As policymakers continue to look for ways to prevent the US from heading over the “fiscal cliff”, a carbon tax stands out as a tool for reducing greenhouse gas (GHG) emissions without the need for additional government spending.

This means lower emissions without new money to pay for major projects or for new subsidies. Policymakers on both sides of the political spectrum should be happy about this.

On the right, former President Bush economic advisor Gregory Mankiw favours a carbon tax as does Nobel economic prize winner Joseph Stiglitz on the left. They are amongst the majority of economists that favour a tax, according to a 2009 survey (see below).

Participants were asked if placing a “price on carbon” through a tax or cap‐and‐trade system would increase incentives for energy efficiency and the development of lower carbon energy production. Source: Institute for Policy Integrity (2009)

A carbon tax can actually stimulate the US economy. Researchers at The Brookings Institution found that a carbon tax would increase US economic growth if revenues are used to reduce capital taxes.

It would also lead to higher investment and higher employment. Economists call this a double-dividend, or win-win situation.

Shifting taxation onto polluting activities protects the environment while lowering other taxes improves economic efficiency.

These economic benefits are a big part of why more than ten countries around the world now have carbon taxes, or use taxes specifically to reduce GHG emissions.

They include (take a deep breath) Australia, Costa Rica, Denmark, Finland, Germany, Ireland, Japan, Netherlands, Norway, Sweden, Switzerland, and the United Kingdom.

In Canada, the provinces of Quebec and British Columbia have also implemented carbon taxes.

A price for innovation

For the US, a tax levied on all six major GHG emissions should be introduced at around $20 per tonne and rise steadily thereafter. This price would be stringent enough to help the US reduce its emissions without being too politically difficult.

Fortunately, there would be other economic benefits from a US carbon tax. Since companies would have to pay more for their GHG emissions, they would find new ways to reduce their pollution – leading to greater corporate innovation.

Companies would also reduce their energy consumption to save money. This would help the US achieve energy independence and protect itself from oil price shocks. Fewer oil imports are needed when energy is used more efficiently.

These benefits may not be costless and certain impacts of a carbon tax would need to be carefully balanced. One concern is that a carbon tax would impact low-income households and the government would need to prevent this kind of impact, such as providing low-income tax credits.

Another concern is that a carbon tax can negatively impact certain energy-intensive or trade-exposed sectors, such as oil & gas and steel production.

It would be reasonable to expect the government to help protect these sectors, such as by providing some support to make up for any lost profit.

However, there are good arguments that support should instead be directed at sectors less harmful to the planet as these are the types of jobs the US needs going forward.

Whether provided directly or through broad tax cuts, a carbon tax incentivizes job creation in these sectors.

It’s a shame that John Watson said that a carbon tax would be bad for the US economy when heads of other oil companies, such as Rex Tillerson, the CEO of ExxonMobil, have come out in favour of a carbon tax.

The economic benefits are there – especially the fiscal argument. Unfortunately, so too is the misinformation.

Ryan Godfrey is an Analyst at the Global Governance Institute. His latest report on why the world needs carbon taxes can be found at www.globalgovernance.eu.

RELATED VIDEO: Kjell Andersson, Policy Advisor at the World Bioenergy Association makes the case for Sweden’s ‘tax switch’ – a lowering of income tax simultaneous to the implementation of a carbon tax

Gama Xul

No. I will not pay to breath, and I know people that will disembowel any tax man that tries to enforce this illegal tax. The carbon-tax is based on false science and fudged statistics. It’s part of an agenda to dissolve national sovereignty and clear the way for global governance.

The Earth has a cycle of heating and cooling. If any scientists try to tell you otherwise, they are poor geologists or lying to stay in whatever guilds they’re members of.

This is simply another way for the crooks with authoritative influence to leech of the slaves of the Earth. I will seek them out, record their backroom dealings, expose them, and see them banished or punished or —- if they are guilty.

\\ Gama Xul
- Eric
  
  This carbon tax is not asking that you “pay to breath(e)”. It calls for a payment to be made for the garbage (CO2) that is being spilled into the air through the burning of fossil fuel. Ever since modern times, people have understood that one must pay for the garbage man to come and take away your trash on a weekly basis (more often for businesses). That is a visible garbage and easier to explain necessity. Paying for the Carbon one “throws away” into the air is more challenging but equally important. To be fair, the revenue generated from this tax must be used to mitigate the harm done by the excess carbon now in the air due to post-industrial revolution use of fossil fuels.
  
  True, the Earth has cycles of heating and cooling, however, records taken from air trapped in the ice in Antarctica shows that during the past 500,000 years, CO2 levels & temperatures have had many cycles of heating and cooling, but CO2 levels have never spiked to its current level (400ppm) in that time span. This fact is the reason why people must act now to lower the CO2 level through this Carbon Tax.
conchop

This is an excellent idea whose time has come. There is more than enough “real” scientific evidence that the carbon output of man is having an adverse and expensive effect on the USA and the world.

A recent article reported that a group of leading economists all agreed that a carbon tax instead of income taxes would spur a renewed economy and would be beneficial to the worlds environmental health.

The real problem with pursuing a carbon tax is the amount of proven carbon reserves owned by the Big Fossil Fuels Industries. They own 5 times more carbon than what it would take to produce runaway global warming and they are using those reserves as collateral in their financial dealing.

As that is the case, every neocon-libertarian-right wing-TEA/GOP-conservative fanatic in the USA has been used by their elitist masters to thwart any progressive movement to resolve the problems of unfair tax avoidance and climate solutions.

If one were to listen to their conservative coal camp climatologists, they would insist that all is well with nature and that you’re killing their jobs. However, the truth of the matter is the obscene tax free profits their elitist master enjoy while the workers leave a legacy of wasted jobs, health, and environment.

A carbon tax would also spark a new American Industrial Revolution based on sustainable energies and living. The tax would be fairly spread and those major corporations who are not paying taxes now could not escape paying their fair share.

The sooner the carbon tax, carbon offsets, and carbon cap and trade occurs, the better off the world will be.