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Why Don't We Tax Carbon Like We Tax Cigarettes?

Posted: 04/12/2013 5:41 pm

Fill the moat. Raise the drawbridge. Steady those crossbows on the turrets. We should be safe in here.

That's the feeling I got when I read the recent analysis by Kenneth P. Green from Canada's Fraser Institute on why Canada should not impose a carbon tax:

"First there would be very little environmental benefits to unilateral greenhouse gas emission reductions by Canada, whose share of global emissions is tiny. Canada's 2010 net greenhouse gas emissions were 692 megatons in 2010, unchanged from 2009, and accounted for only two per cent of global greenhouse gas emissions. Cutting that in half (which would require a very stiff carbon tax) would do almost nothing to alter the trajectory of future climate change. The tiniest growth spurt in China's vast economy would render any emission reduction that Canada might accomplish meaningless."
Yes, this makes perfect sense if we all lived in walled fortresses safe from the broader environment. In fact this argument could be used by any small country, community or company. "Hey, we are just a small cog in the wheel here, what can we do?"

In reality this kind of thinking is sheer folly. Medieval castles were in fact vulnerable: many a mighty bastion fell after being surrounded and starved into submission. Similarly, so is our society vulnerable to external forces -- such as global warming -- if we don't take decisive action.

To combat this very real threat, some are advocating a carbon tax. There is talk in the United States that this could be the way to go, although it faces stiff opposition from most Republicans. Australia, a resource-based economy similar in size to Canada, has enacted such a tax, although it's controversial and subject to change if the current government falls from power.

Conservatives are typically opposed to such an idea, largely because they look at the tax in a one dimensional prism. They believe such a levy would hurt profits, raise the cost of production and, therefore, curtail job growth.

But well designed taxes can be used for the public good. Today, how many would argue that we should remove taxes on cigarettes? Yes they raise big money for governments but there is an obvious broader policy objective at work here. Cigarettes cause cancer and most people that smoke will eventually need very expensive health care in the future. High taxes also help to dissuade people from smoking at all, or help motivate many to quit.

A carbon tax is like a tax on tobacco. We need to make sure we are paying the full cost of something that is going to cause havoc down the road. In fact a carbon tax could be even revenue neutral, i.e., the money could be refunded to help the needy.

Carbon-based fuels cause pollution and global warming. These hazards will prove costly for future generations if we don't do something to curb our demand now. Here is a recent editorial from the Washington Post:

"Despite the popularity of many energy-subsidy schemes, the net result is a big drag on world prosperity. Government policies that make prices artificially low encourage people to use too much energy, resulting in pollution that dirties local environments, congested streets and global warming. At the same time, subsidies distort investment; instead of allowing capital to flow to where it would do the most good, they push it toward fossil-fuel production -- and away from enterprises that would more usefully employ some of the money, such as clean energy."

If we tax carbon, do we just stay home and try not to consume anything? No that is not the answer. What we need to do is unleash market forces to develop, cleaner alternative fuels that are not so taxing on the planet.

Renewable energy is often seen as something as too expensive and that must be subsidized by government. In reality it is the carbon-based fuels that are subsidized because we are not paying the true cost of these fuels.

So instead of saying a tax will cost so many jobs, we need to ask how we can contribute to a better society that generates sustainable jobs for the future. Canada may not use a lot of carbon at home but it is a major exporter of oil and the biggest supplier to the United States. But demand for these fuels may not last, consumption from our southern neighbor is falling. It's time to think of cleaner, safer ways to make money and jobs.

I will give the last word to Neil Young:

Dead man lying
by the side of the road
With the daylight in his eyes.
Don't let it bring you down
It's only castles burning...

Loading Slideshow...
  • 14. Orinoco tar sands (Venezuela)

  • 13. Caspian Gas Production (Turkmenistan, Azerbaijan and Kazakhstan)

  • 12. African Gas Production

  • 11. Unconventional Gas In The US

  • 10. Caspian Oil Production (Kazakhstan)

  • 9. Deepwater Oil Drilling (Pre-Salt) Brazil

  • 8. Gulf Of Mexico Deepwater Oil Drilling

  • 7. Iraqi Oil

  • 6. Coal in the U.S.

  • 5. Tar sands in Canada

  • 4. Coal in Indonesia

  • 3. Artic drilling for oil and gas

  • 2. Coal in Australia (aggregated)

  • 1. Coal expansion in China‚Äôs Western provinces

 

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