Carbon Tax – Terrascope Mission 2021

A carbon tax is a tax on fossil fuels intended to reduce the emission of carbon dioxide. While it is focused on prevention, it can also support mitigation and adaptation programs. Economists have long contended that a carbon tax is the most effective and simplest way to reduce carbon emissions. As it is cheaper and more efficient than attempting to subsidize alternative fuels, carbon taxes have virtually zero drawbacks.

Energy

A carbon tax is the most efficient way to reduce fossil fuel usage. Fossil fuel companies will not be able to put as much money into fossil fuel consumption, therefore lowering the amount of fossil fuels used. With the loss of energy from fossil fuels, renewable energy sources will be able to be more utilized. Although, if not every country adopts a carbon tax, then companies in countries with one can import fossil fuels.^{[3, section “UK”]}

Transportation

A carbon tax put on transportation in the short term will have little effect on consumer decisions but in the long term can force consumers to switch to more efficient vehicles or alternative vehicles such as hybrids or electrics. Research by Antweiler and Gulati found that consumers in British Columbia responded to the carbon tax by buying more fuel-efficient vehicles.^[1]

Public Health

Since a carbon tax lowers CO2 emissions, air quality will increase effectively improving the cardiovascular and respiratory health of the overall human population. CO2 emissions can cause increased heart attack rates, cardiovascular diseases, asthma, and decreased lung capacity as well as exasperate pre-existing respiratory illnesses, all of which will be mitigated by a carbon tax.^[2]

Examples

A few countries around the world have, have had, will have or were in the process of creating a carbon tax. The most significant tax cases are the United Kingdom, Australia, and Canada and its province, British Columbia

The United Kingdom has a carbon price floor, which is a minimum price that fossil fuel producers pay to emit CO2. CO2 emissions have fallen since 1990, more sharply since 2013 and hit levels not seen since the last decade of the 19th century. Coal use has fallen 74% since 2006 with wind turbines producing more energy than coal plants in 2016. However, the carbon tax only has to last to 2021 and UK fossil fuel producers could potentially import from other European countries that do not have a carbon tax in order to bypass the carbon tax.

Figure 1: U.K. electricity generation. Source: carbontax.org^[3]

In Australia, the government implemented a carbon tax on July 1, 2012 and then repealed it on July 17, 2014. In 2013, national electricity generation with highly polluting lignite coal had fallen 14%, conventional coal fired generation fell by 5%; renewable electric generation “soared” by 28% and electricity output from lower-carbon methane increased by 9.5%. However, in an Australian article, it was said that “voters have never stopped hating the tax and its effect on their electric bill.”

Figure 2: National electricity market at time of implementation of carbon tax; red line is when it was repealed. Source: carbontax.org^[3]

Canada is set to impose a national carbon price in 2018, with a minimum of 10 Canadian dollars per metric ton of CO2 and increasing annually by $10/metric ton until it reaches $50 in 2022. Canada’s prime minister, Justin Trudeau, set a time limit of 2018 for provinces to adopt a carbon tax before the federal government adopts its own nationwide, revenue-neutral carbon tax. British Columbia has a carbon tax that qualifies as the most significant carbon tax in the Western Hemisphere, having implemented a tax of $10 (Canadian) per metric ton that has been increasing by $5/tonne annually. Per capita emissions of CO2 decreased 12.9% between 2008 and 2013 (the only data available for the carbon tax) versus the 3.7% for the rest of Canada. While the tax slowed economic growth, it didn’t impede it. From 2008 to 2013, GDP growth in British Columbia slightly outpaced growth in the rest of Canada, even with the carbon tax (1.55% vs 1.48%). However, greenhouse gas emissions increased in 2012 and 2013 after British Columbia’s carbon tax ceased to increase annually, suggesting that the carbon tax needs to keep increasing in order to keep being effective.^[3]

By: Zachary Alfaro

References

Ecofiscal Comission. (2017, February 2). Driving change: Carbon pricing and the transportation sector. Retrieved from https://medium.com/@EcofiscalCanada/driving-change-carbon-pricing-and-the-transportation-sector-8aa88e47cf13
(2013, May 6). Tax Carbon for Public Health. Retrieved from http://wordpress.vermontlaw.edu/environmentalhealth/2013/05/06/tax-carbon-for-public-health/
Where Carbon Is Taxed. (n.d.). Retrieved from https://www.carbontax.org/where-carbon-is-taxed/