The Green Spot: A Good Carbon Tax?!?!

A carbon tax. Such a simple phrase and on the surface not a bad idea. Tax the stuff you don’t want people to do to there by encouraging the desired behavior. It’s sort of like taxes the hell out of cigarettes, the government isn’t going to ban it, but they are going to make it costly enough for you to at least think about it and give the government some money to deal with the social outfall of the product.

Yet like all simple ideas, it hardly transfers well to reality.  I won’t even start linking to all the news articles that say the carbon tax is a bad idea.  Frankly most of them say that so you can read those easily enough because they all think we are going to shoot our selves in the foot when it comes to trade with countries that don’t have a carbon tax.  A fair point.

So needless to say I was a little thrilled to read this article on how to make a good carbon tax that could work.  Basically they suggest you model it the GST.  Everything gets taxed (including imports) based on the amount of CO2 produced at each stage of production.  To be fair to importers to Canada they could get a tax credit in their home country if they have a carbon tax.  A issue with this approach is you need to determine the amount of carbon emitted with each stage of production which is going to be costly to actually meter, so some kind of quick formula will need to be developed to allow a rough estimate in the case of the data not known (at least at the start of the tax).  A real benefit to this method would be every choice you make in your day would be influenced by the cost of the CO2 to make the product.  So if your green pepper comes from South American versus Canada guess which one is going to likely be cheaper after the tax?  Likely Canada.  A tax like this should be rolled right into the display price so customers can make informed decisions on the products or services they buy.

Overall I have to admit I like the idea.  Like all ideas it does have it’s issues, but at least that article tried to find a solution rather than just complaining about it.  So what do you think of carbon taxes?  Any other ideas on how to make it work?

3 thoughts on “The Green Spot: A Good Carbon Tax?!?!”

  1. Although I like the idea of a caron tax, I agree that it would need to be structured in such a way that it doesn’t put our local businesses at a disadvantage.

    On the other hand, I think that the article you mention minimizes the complexity of assessing the carbon impact of each product imported from a no-carbon-tax country. To me, this looks like it would be a nightmare to administer.

    A simpler alternative would be to assess a country’s stand on carbon emission (i.e. do they have an equivalent carbon tax) and apply a general carbon tax on all products imported from that country. That tax would be country-specific, so a country that has a carbon stance that is closer to ours would be taxed less than one who doesn’t care.

    It would be less fair for products that have little carbon impact from a country who has no carbon tax. But that might actually prove to be an incentive to introduce one, since *all* their products would be penalized for their carelessness.

    Problem is, both the article’s carbon tax and my alternative run the risk of running afoul of the World Trade Organization’s rules. You can be sure a penalized country would complain there, and if no agreement has been reached there, we would get slammed by penalties.

    CHeers,
    Frog

  2. Interesting article- thanks for the link.

    I’m not a fan of the theory of carbon taxes at all, as I see a carbon tax only serving to increase the prices that consumers pay on virtually every product we purchase, while doing very little to actually reduce carbon emissions. While in theory a carbon tax would lead consumers to purchase more “green” products and thereby indirectly reduce emissions, I’m not convinced that this would actually be the practical result.

    It seems to me that a cap and trade or CCS system would have a greater impact on net greenhouse gas emissions, without driving up prices for consumers to the same degree.

  3. MGL,

    I agree a focus on CCS and cap and trade would give us more bang for the buck, but the issue is those companies need a $ value for a tonne of CO2. Without that they can’t evaluate what is the best method to deal with the CO2 for them.

    So either tax it or have a $ value on not making your targets. The government really needs to provide some clear direction which they have so far failed to do.

    Tim

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