Monday, July 27, 2015

The Time Is Right For a Carbon Tax

The time is right for the United States to initiate a carbon tax.  Indeed, given the rate of global warming the time is well past due, but given the significant decline in the price of fossil fuel a carbon tax would not be much noticed and so the central economic argument against it can not stand.  Moreover, the tax would succeed in inhibiting the use of fossil fuels, at this time of dire need for global warming reduction.
 
A carbon tax is a dollar sum placed on carbon dioxide emissions at the producer level.  The producer decides whether to pass along the tax cost to the consumer (or absorb a reduction in profits).  The express purpose is to make carbon more expensive.  
 
However, the carbon tax is a bit of misnomer: it is NOT an actual tax, because it is intended to reduce other collected taxes, such as income taxes, on a dollar-for-dollar basis.  It is not regressive (i.e., it does not effect the poor and rich evenly) because the wealthy use more carbon and the rate of income tax adjustment enables fair offsets in income tax for each income tax bracket.  Really, a carbon tax is just a re-allocation of taxes, working simply to make pollution more expensive.
 
The United States would not be going it alone with a carbon tax.  Indeed, these have been in place in progressive countries for years.  For example, many European nations have implemented a carbon tax: Sweden has had one since 1991, it has moved progressively higher, and yet while it has significantly reduced emissions it has not had an adverse impact on its economic growth.

A carbon tax figure often mentioned is $25 per ton of carbon dioxide.  That would add about $.25 to a gallon of gasoline, about $.005 to a kilowatthour of electricity.  But again, this money is intended to be redistributed to produce a net-zero increase in federal taxes, and so it merely induces greater use of alternative energy and more efficient devices.  In that way, it is credited with domestic and international success in driving the economy forward toward ever-improving technology.

The primary argument against a carbon tax is that it would detrimentally effect the fossil-fuel economy.  However, the average cost of a barrel of oil has declined by half and with Iran returning to the market the glut of its oil will likely keep prices low for years to come.  Similarly, the price of natural gas is at historic lows with more reservoirs being regularly discovered.  With the reductions in the cost of this fossil fuel energy, the carbon tax will not be significantly noticed by the consumer.

Oil and natural gas account for the majority of all carbon dioxide emissions.  Because of the low price of these commodities, their use may expand, to the detriment of renewable energy production, to the detriment of our health (the cost of adverse health effects due carbon fuel pollution is estimated at $120 billion annually), and to the detriment of increased global warming (the cost of harm caused by global warming is estimated at $2 trillion annually).  And the estimates of the damage caused by fossil fuel pollution is only increasing as the estimates become more accurate  --  and, the cost of species extinction is incalculable.

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