The Carbon Tax

            We have considered many options of attempting to slow down and eventually stop all carbon emission for the sake of our planet Earth. The main reason for anthropogenic climate change is the greenhouse gases (GHGs) that we leave behind after burning fossil fuels and digging for natural gas to keep our homes warm in the winter. GHGs are gases that absorb and emit radiation into our atmosphere like carbon dioxide, methane, and nitrous oxide that are considered “heat trapping gases”. In order for the human race to coexist with our planet, we will need to take drastic steps to accompany this transaction. There has been talk of action for many years but not enough put into practice. A carbon tax would be a good step for America since we are one of the largest fossil fuel burning countries in the world. This tax would internalize externalities and help companies consider the costs of our future generations and the destruction of our home. As of now oil companies are running rampant and transforming beautiful sacred landscapes into tar sands and digging into oceanic crust while polluting our own water while we sit back and let it happen.

            Attempts have been made to implement a carbon tax into legislation in the United States but have failed in their design. When proposing a carbon tax, it has been learned that three central issues are needed to be addressed in order to have an adequate design. The three issues are: the tax rate, the tax base, and the international trade concerns. The one thing that is understood by climate scientists and anyone who believes in climate change is that a proposed carbon tax rate should reflect the marginal detriment from emissions. The ultimate approach we can make on a good design for carbon tax is to ensure the rate changes over time when new evidence becomes presented about the pros and cons of reducing emissions. Utilizing a crude estimate of the best rate and amending the rate when new information develops is an ideal option. A commission or partial commission should be appointed to have the tax rate reexamined sporadically and give expert feedback on the relevant limitations for setting a rate. Intermediate managements would be encouraged if delegation isn’t possible given the size of the tax.

            The tax base would need to be large to increase collection costs. In order to successfully do this according to “The Design of a Carbon Tax” by Gilbert E. Metcalf and David Weisbach, “we show that collecting the tax upstream would make it possible to accurately and cheaply cover 80% (share of U.S. CO₂ emissions consisting of CO₂ from fossil fuel combustion) of U.S. emissions by collecting the tax at fewer than 3000 points, and that it would be possible to cover close to 90% of U.S. emissions at a modest additional cost.”(FN1) The substantial problem that lies with upstream collection is for the fossil fuel industries that are using product into non combusted material are being overly taxed.

            The design of trade in carbon-intensive goods is flawed because of one simple method that is lacking. “A system of border tax adjustments to prevent so-called carbon “leakage,” the shifting of production to countries without a carbon pricing mechanism.” (FN1) To achieve this problem of border tax adjustment there would have to be information on how the item was produced and what how much energy went into its production. This information may be challenging to acquire for a carbon tax. In summary, the recommended route for border tax adjustments would be to give favor to companies who export/import less carbon intensive goods.

            There has been little to zero talk about climate change during the election this year, but there could still be hope right here in the United States. The state of Washington is amongst a dispute for imposing a tax on carbon emissions. Initiative 732 is a proposal that has started by Yoram Bauman an economist who has gained support for a campaign to put a tax on petroleum, gas and coal industries. The tax would also gradually increase to motivate these industries to invest in solar and wind renewable power. “The tax would start at $15 per metric ton next year, increase to $25 a ton in 2018 and then rise gradually over a few decades until it hits $100 a ton in 2016 dollars.”(FN2) To put this in perspective, 5 metric tons of C0₂ are emitted from an average car each year. It has been long known by climate scientists and economists that greenhouse gas emissions should be taxed upon a gradient to motivate producers to transition their companies out of the fossil fuel industry. British Columbia’s carbon tax that was set into motion in 2008 has been the model for initiative 732. Taxes have been implemented into legislature in Sweden and Ireland already. If Washington can beat the system, it would be the first in the country and would be a great influence on other parts of the country. Initiative 732 will also increase taxes for the average person such as gasoline for your car and the heat in your home. “At $25 per ton, the proposed Washington tax would increase the price of gasoline by about 25 cents a gallon and increase the cost of coal-fired power by 2.5 cents per kilowatt-hour.”(FN2)

            Washington is looking forward to having taxation more progressive by reducing the state sales tax according to Carbon Washington, the campaign responsible for Initiative 732. Meanwhile, initiative 732 is confronted with disagreement from many angles such as fossil fuel industries and manufacturers, but shockingly enough some of the environmental crowds have opposed the campaign as well. Groups such as the Sierra Club and the Washington Environmental Council have said they believe the direction of the initiative is reasonable but that it would not help the production and investment of renewable energy, mass transit and other projects that are in need rather than simply cutting the sales tax. It seems to be a pretty close call for the polls to favor the initiative. “A recent poll showed that 42 percent of voters in Washington support Initiative 732, 37 percent oppose it and 21 percent are undecided(FN2).” The majority of politicians are against the voting for a carbon tax such as Gov. Jay Inslee, who is a Democrat attempting re-election with a vision for cap-and-trade taxation. Hopefully enough people will vote this initiative into action and the Gov. Jay Inslee will not get votes for re-election.

            In order to understand why we need a carbon tax in our country we need to look closer at the seven billion metric tons of C0₂ emitted in the U.S. every year. This number is equivalent to about 20% of emissions from the whole world. That amount of C0₂ is also referring to other gases that give off emissions such as methane and nitrous oxide that trap heat in the atmosphere. Climate scientists use global warming potentials (GWPs) as a factor of determining how much each emission equals by means of affecting the climate. Methane is a much more potent greenhouse gas and is twenty-one times more potent than C0₂ so they give it a twenty-one.