Posted by Tim Stobbs on August 22, 2008
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?