07 April 2014

Say yes to Carbon Tax

Lauren Zhu writes:*

The streaming BC carbon tax debate continues since the first day of its implementation in 2008. And as I have acquired more knowledge on the phenomena, I have become a total supporter of the tax policy. I believe that the most effective method to reduce green house gas emission is to implement compulsory policies including taxation (price each unit of emission), limited permit system (cap-and-trade) or set regulations on the production side. Among which tax policy would be the most efficient and effective policy to have to influence people’s behaviors. Tax on per unit of emission polluted has a direct impact on price (ex: gas price) which is the main mechanism of changing consumption of gasoline. In addition, tax policy is also the most cost effective. It doesn’t require huge amount of transaction cost and it is significantly simpler than cap and trade system. However, it is inevitable that tax policies encounter great political difficulties.

Bottom Line: If you want to reduce green house gas emissions; it is not FREE. And the alternative policies to a carbon tax (regulations) are more expensive and less economically efficient.

* These guest posts are from students in my resource economics class at Simon Fraser University. Please leave feedback on their logic, ideas and style and suggestions of how to improve.

7 comments:

  1. sun guojun(301187483)08 April, 2014 01:01

    Before i read this article, I thought that only putting a tax was too simple and inefficient. Because the cost on tax was not higher enough to prevent people releasing green house gas compared to the benefits they generated from the production which had a large green house gas emission. However, as the author said in this article, the tax policy had a direct impact on price. It means the progress of implementation is simple. The simple progress will stop vested interests group obstructing the policy implementation.If the author can compare some other specific regulations to carbon tax regulation, people can understand this more well. They will all say "yes" to carbon tax.

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  2. Ka Fung Cheung10 April, 2014 06:54

    I think the carbon tax is a great policy and should be used in countries like China where air pollution is affecting many people. I think the government should inform the citizens that they are not necessarily worse off after the tax is implemented.

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  3. The international (most active in US and Canada) Citizens Climate Lobby is a non partisan group that advocates a carbon tax with the funds all returning to households. Economists like Conservative Greg Mankiw and LIberal Paul Krugman, agree that this is the most leveraged policy action governments can take to reduce emissions and that it can be a boost for jobs and innovation in clean energy. By returning all revenue to households (a revenue neutral tax), it buffers the rising cost to the pricing of carbon, especially for those in middle and lower income brackets.

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  4. You said tax policy is simpler than cap and trade system to implement and more effective. However, I think they are totally two different ways about controlling gas emission. The cap and trade is the method of regulate producers, and the carbon tax is the method of regulate consumers. If we only have carbon tax such as on gas price, it will be more suppliers in market. Because the cost of producing is lower. That is what we would not like to see.

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  5. It is hard to deny that Carbon Tax is an easy method to reduce the amount of CO2 emission. However, Carbon Tax also introduce some inefficiency from economist side compared to Cap-and-Trade. There are some researches show that tax revenue from Carbon Tax are invested into some technology which not much help to citizens. The revenues from Cap-and-Trade are used to help other province as a kind of subsidies. Although it is harder to apply Cap-and-Trade policy, I believe it is more efficient than Carbon Tax in Long run.
    By 3705

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  6. @Lily -- C&T and Carbon tax BOTH increase prices to consumers. Suppliers *will* pay under C&T.

    @3705 -- you appear to be citing "sources" to support your opinion.

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  7. @Lily:
    My apologies if I didn't expressed myself clearly in the post; I am not advocating anything in particular but simply pointing out that the tax, which is per unit of carbon in fuels, increases the relative costs of carbon intensive products(ex: gasoline). And unless everyone is guaranteed a tax-cut that equals to the total carbon tax they paid, the tax policy creates greater incentive than the Cap and trade system to reduce emissions.

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