Carbon Tax
David Kestenbaum of NPR recently published an interesting article regarding an easy way to tackle climate change: implement a tax on carbon emissions.
He discusses a solution proposed by Henry Jacoby from the Sloan School of Business at MIT. If an energy source emits more carbon dioxide than another arbitrary source, it’s taxed at a higher rate. Let’s deconstruct this approach:
Levying a new tax would require congressional action. Name how many Senators or Congressmen that have a majority of constituents clamoring a tax on their gasoline...we’re willing to bet you can’t name one. A cap-and-trade approach, where the costs are mostly hidden from public view, is more likely to gain political support instead of an outright tax.
However, if this carbon tax were to replace other taxes, as some of suggested, this approach might be received in a much more positive light. This is especially interesting if the displaced taxes are those economically and socially distorting taxes, such as payroll or income taxes.
The straightforward nature of a tax makes this approach more feasible to have immediate and direct impact on our carbon output, rather than the overly complicated cap-and-trade systems that will have a protracted period of negotiation and rollout. We have about 13 years left of our current carbon emission quantities until irreparable damage is done to the environment, so time is of the essence.
A tax would equitably affect individuals from different socio-economic classes. The rich, with a carbon-intensive lifestyle that includes flying and private transportation, will in effect pay a much higher tax rate than the middle-class and poor, who use public transportation and fly less frequently.
This would apply additional pressure on the energy sector to develop less carbon-intensive methods to generate electricity, which is sadly still overly reliant on the first technological discovery of mankind: organic material burns.
A criticism of this approach is that it will drive carbon-intensive product manufacturing offshore, but this argument is partially nullified if other taxes are offset after introducing a carbon tax. For those who claim this simply shifts the environmental ramifications to other countries, the answer is to introduce import levies and tariffs that correlate to the product’s footprint. This enables us to apply international pressure to increase the priority of environmental impact.
A myopic criticism is that introducing this tax will make little environmental impact. What proponents of this view fail to recognize is that the environmental impact is entirely correlated with the extent of the tax. The higher the tax rate, the more our society will rely on low-impact technologies and energy.
We think it’s clear the pros outweigh the cons to a carbon tax. With 13 years left before Earth incurs irreparable environmental damage, we have to start somewhere - and this is the simplest place to start.
