Carbon Taxation Is So Wrong

The theory behind Carbon Taxation is this : according to the “Principle of the Polluter Pays”, one of the guiding principles established by the global community in the early 1990s, environmental bads should be charged.

In other words, if you mess up, you should pay for it. And that includes Carbon Dioxide Emissions.

The trouble that arises is the cost “double whammy”.

If an organisation or a company, or even an individual, is being charged for their Carbon Dioxide Emissions, then they’re going to be financially stretched to pay for the investment they need to make to reduce their Carbon Dioxide Emissions.

You can hardly expect a corporate body to be willing to say to their auditors “Well, we had to pay for our Carbon Tax this year, and we also had to pay to reduce our Carbon Dioxide Emissions, so that we are not liable for so much Carbon Tax next year.”

The accountants won’t like that one single bit. No. If taxing Carbon Emissions is the right way to go, then there needs to be a slow ramp up to allow people to adjust.

We say that, say, by the year 2015, emissions will be the largest they will ever be : after 2015 they will be falling, and that’s for everyone, regardless.

If accountants look at the timeframe of 2015, they have a bit of time to react by apportioning a budget, getting the management to make concrete plans, informing and training the workforce, changing equipment and machinery.

Come 2015, emissions will have peaked and start to decline.

Then what’s the point of a Carbon Tax then ?

If you regulate emissions away, there’s no need to tax people for them.

And as for the “Polluter Pays” principle : corporates and organisations will just pass the costs on to their consumers and citizens. The poor will get poorer. As usual.

2 thoughts on “Carbon Taxation Is So Wrong”

  1. Hi again,

    I’m not sure this is correct either. You propose direct regulation as the best solution, correct? And you say that a carbon tax will make the poor poorer, because corporations will pass on their costs.

    Well, if you regulate carbon emissions, and tell a company to emit less, then that will increase their costs. Which they would pass on to consumers. So there’s no difference there.

    With the carbon tax, you could negate the impact on the poor by giving the money back on a per capita basis. James Hansen proposes this, he calls it “tax and dividend” So you have reductions in carbon use because people have to pay for it, and the money gets given back.

    Your bit about the accountants makes little sense. This part:

    “You can hardly expect a corporate body to be willing to say to their auditors “Well, we had to pay for our Carbon Tax this year, and we also had to pay to reduce our Carbon Dioxide Emissions, so that we are not liable for so much Carbon Tax next year.””

    Of course people would pay to reduce emissions, if there was actually a law compelling them to, and they would be thrown in jail if they didn’t. Your conclusions don’t follow from your premises.

    If your concern is that it must be gradual to avoid the “cost double whammy as you call it”, well, that same thing applies to regulation.

    The reason for favouring a carbon tax over direct regulation is that there may be some people emitting carbon but who if forced to pay more could easily switch to a low carbon method of production. And there may be others who could not.

    A system of direct regulation would either have to figure that out, which would be extremely complicated, or just cut everyone’s ability to emit, which would be inefficient, because the first guy is still emitting carbon when he could easily switch, while the second guy faces large difficulties because he can’t switch that fast.

    In short, both of the disadvantages you point out about carbon taxes are also true of regulation. Carbon taxes have one advantage over regulation in that the state doesn’t have to figure out how and where to cut emissions, it just sets the prices. You haven’t addressed this point.

    I’m just posting this because climate change news linked here. I think you should learn a bit more about carbon taxation and carbon trading before you write about them, or at least make your arguments in favour of regulation clearer.

  2. @graeme

    Again, thanks for your contribution.

    I think that Carbon Taxation is a bad idea, and an ineffective one.

    First of all, taxes on unwanted behaviour only work when there are alternatives to the unwanted behaviour. Currently, over 90% of the World’s Energy is sourced from Fossil Fuels. Without alternatives, Carbon Taxation would simply be an inflationary factor.

    If there were to be a general Carbon Tax, the price of everything would go up. If the price of everything were to rise, this would amount to inflation. Within a short time, the cost of Carbon would re-relativise in the new inflated Economy. In other words, the disincentive of the Carbon Tax would be lost.

    Secondly, Tax-and-Dividend, although it would have a “wealth redistribution” effect, giving more to the Energy poor (which is the same as giving more to the poor in general), it would not provide for de-Carbonisation, as the dividend would be used as compensation.

    Third, there is no reason why Carbon Taxation would incentivise de-Carbonisation of large emitters. Large Energy Supply companies and other corporate organisations would simply pass the tax on to their customers in the form of higher product prices, and carry on emitting.

    I don’t think that Carbon can be effectively priced to stimulate all sectors to de-Carbonise their operations.

    The kind of regulation I seek is Fair Shares – a Carbon Cap applied to all sectors, including end consumers.

    This system is at the heart of the Contraction and Convergence model for global Carbon control.

    I want to see every citizen with Carbon Energy Rations.

    Yes, there would need to be a trading element in the implementation of a rationing system, between countries and corporations in the Contraction & Convergence (C&C) model, and in TEQs (Tradable Energy Quotas) for citizens. But the actual price of the rations would be meaningless.

    The current attempt at a Carbon Trading system in Europe has been a dismal failure. A number of tax regimes for various purposes around the world have failed to change behaviour long-term. There is no guarantee that pricing Carbon will eliminate it.

    We need to take a holistic approach and prevent Fossil Fuels being mined out of the ground by creating a real limit to how much can be distributed for sale. That can only be done by a rationing system. And that’s not a priced system.

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