The Tax on Carbon: a Good or Bad Idea?

The Tax on Carbon: a Good or Bad Idea?

For a long time now, governments have tossed around the idea to tax a company’s carbon emissions. This article will look at how a carbon tax would cost the US economy and if it will actually have a net positive return for the environment. From my earlier article on the cost of driving your car (read it here) there is a pretty high cost to the environment and humans by CO2. The government says it’s around $40 per metric ton emitted and a private study by the University of Stanford has the cost closer to $220 per metric ton emitted. So let’s say we wanted companies to stop polluting so much and seek out greener alternatives. To do this, the government puts a tax of $40 on every ton emitted per company. In 2016 total US CO2 equivalent greenhouse emissions totaling 6.587 trillion tons. So, assuming a perfect world, this tax could produce $263.48 billion for the US government per year. If we use Stanford’s estimates and implement a tax of $220 per ton, you get $1.449 trillion in revenue for the government. That sounds amazing, right? Well, not so fast.

A tax like this could be a killer for the US economy, especially those industries that are built on CO2 emissions: coal, travel, shipping, etc. Coal, for instance, attributed for 1.13 metric tons of CO2 for every one kilowatt-hour of power produced. In 2014, the US used 3.886 trillion kilowatt-hours. Coal makes up for about a third of US power production, so coal produced 1.295 trillion kilowatt-hours and emitted 1.463 trillion tons of CO2, or around 22% of the total US greenhouse emissions just from coal. So, a tax of $40 dollars per would cost the coal industry $58,520 million. The total industry profits over 5 years were only $8,407 billion. A tax like this would essentially kill the US coal industry, putting 65,000 workers out of a job. One of the largest producers of CO2 in the US couldn’t survive this tax and that is on the low end of the cost of their emissions. If you remove them from the tax then you lose 22% of the revenue from the tax.

Okay, let’s look a little smaller then. What if there was a tax on the transportation industry, planes, cars, buses, etc. Since the average American car produces 4.7 metric tons of CO2 per year,  that comes out to a tax cost of in between $188 and $1,034 per car you own depending on which end of the cost spectrum you think is fair to tax. That can end up costing more than insurance for your car in some cases. Air travel is another industry that would be hit very hard. In a flight from New York to L.A., a plane would emit just around a ton of CO2 per passenger. If the whole tax was passed onto the passengers in the plane, the cost for a seat would jump up around 10% or more depending on the cost of the ticket or the length of the flight once again on the low end of the estimated cost of CO2 to the environment. Some tickets could double in price if the tax is pushed towards the more expensive side. This would most likely have a negative impact on American’s ability to travel, hurting the global tourism industry.

Since almost every product you purchase has caused some kind of CO2 emissions, chances are everything will become more expensive. And no one likes paying more for something. Obviously, this tax could seriously hurt the US economy and send us into another recession without a doubt. But don’t lose hope to make America green again. Many other countries have plans to reduce emissions; some have even pledged to become zero emissions in the coming years. Even companies are working towards reducing their own emissions voluntarily. Instead of taxing the harmful industries, some countries are subsidizing the green industries to achieve this goal. Countries in Northern Europe have had success with this strategy by subsidizing consumers purchasing electric cars over their internal combustion competition. Norway, for example, has given consumers that purchase electric vehicles many incentives such as exemptions from sales and road taxes, free travel on toll roads and on ferries, bus-lane access, and free parking. These incentives have worked so well that now over 50% of all the vehicles on Norway’s roads electric or plug-in Hybrids.

Many people are still in support of this tax because it will reduce the amount of C02 and other greenhouse gasses in the atmosphere. The idea of this tax not only would reduce the amount of greenhouse gasses but the revenues from this tax could be spent in many different ways to help grow the American economy, build schools, or many other positive programs. However, As climate change is getting worse and more greenhouse gasses are being pumped into the air, it’s obvious that something needs to change to keep the earth healthy. However, with the possible damaging economic impact of this tax, it is clear that there is a much better way to reduce carbon emissions. Signs are showing that we are moving in the right direction and greenhouse gas emissions are being reduced but not at a fast enough rate.


Sources:

Carbon Brief Staff. “Paris 2015: Tracking Country Climate Pledges.” Carbon Brief. N.p., 02 June 2017. Web. 22 June 2017.

Politifact, and D-Ill. Brad Schneider U.S. Representative. “Are There Three times as Many Solar Jobs as Coal Jobs?” @politifact. N.p., 25 Apr. 2017. Web. 22 June 2017.

“Inventory of U.S. Greenhouse Gas Emissions and Sinks.” EPA. Environmental Protection Agency, 14 Apr. 2017. Web. 22 June 2017.

Stanford University. “Estimated Social Cost of Climate Change Not Accurate, Stanford Scientists Say.” Stanford News. N.p., 08 Apr. 2016. Web. 22 June 2017.

“Coal Industry Profits.” Taxpayers for Common Sense. N.p., 27 July 2012. Web. 22 June 2017.

Serchuk, David. “Calculating The True Cost Of Carbon.” Forbes. Forbes Magazine, 03 June 2009. Web. 22 June 2017.