With the very hot summer in much of the US causing some climate watchers to fear global warming may be coming faster than previously estimated, is it time to implement a new carbon tax – at a pretty steep level – to dramatically reduce carbon emissions in the short term?
That's the proposal from Dr. Robert Frank, an economics professor at the Johnson Graduate School of Management at Cornell University, in a recent newspaper column.
Frank notes that chances right now for climate change legislation coming out of Washington are pretty slim. Though the then Democrat-controlled House of Representatives passed did pass a bill in 2009 that would have created a "cap and trade" system to lower greenhouse gas emissions, the effort died in the Senate.
Since then, the Republicans have taken back the House, and frankly neither party is really pushing climate change legislation to any degree. However, the Obama administration's Environmental Protection Agency has been somewhat quietly enacting a number of new rules that will limit greenhouse gas emissions, including recent changes that in effect will mean no new coal-powered electric plants will be built in the US.
California also implemented a new cap and trade system for large manufacturers and utilities that started in January. In 2015, it will also include fuel distributors, widely expanding its impact. However, the program is far off schedule, and some environmentalists fear it will be dragged out for years, as the implementation is proving harder than expected and fears over the program's impact on California's weak economy persist.
While acknowledging that climate science is still highly uncertain at this point in time, Frank believes it is urgent to err on the side of caution. He notes an M.I.T. global climate simulation model which indicates there is a 10% chance that average surface temperatures will rise by more than 12 degrees Fahrenheit by 2100.
"Warming on that scale could end life as we know it," Frank says.
As a opposed to a complicated cap and trade system to lower carbon emissions that many believe will not be effective, as has been the case in Europe, many environmentalists favor a straight tax on carbon. This would usually be levied at the source of energy production (such as oil companies), based on the amount of carbon each type of energy emits.
The cost of the tax would be passed on down the chain to the ultimate users of the energy, such as businesses and consumers. As the cost of gasoline or heating and cooling homes and offices rises, energy consumers will take steps to reduce their energy usage, or switch to energies that are less carbon-intensive, and hence have a lower tax on them.
Frank says earlier studies by the Intergovernmental Panel on Climate Change estimated that a carbon tax of up to $80 per metric ton of emissions would eventually result in climate stability, and that a tax at that level that might raise US gasoline prices by about 70 cents per gallon.
"But because recent estimates about global warming have become more pessimistic, stabilization may require a much higher tax," Frank says.
How high? What about $300 per ton? What kind of impact would that have?
Frank would favor a gradual phase-in of a carbon tax to that level, but when fully implemented, it would raise gas prices by about $3.00 per gallon. Frank notes that this would only take US gas prices to near levels already managed in some European countries.
Frank sees other benefits to such a high carbon tax rate beyond just reducing carbon emissions. First, the proceeds could be used to reduce the US budget deficit. TheGreenSupplyChain.com will note, however, that many believe that carbon tax proceeds should actually be redistributed to tax payers in some way so that in the end it is "tax neutral." Also, many would complain that such a tax would be regressive, hurting the poor.
Like others, Frank also believes that such a tax would create a ton of new jobs, as companies race to build clean energy solutions. That is a tough argument to make given recent history of clean energy and jobs, but that's Frank's perspective.
Frank acknowledges that such a tax would put the US at a competitive disadvantage versus other nations such as China if they did not also enact such a tax. But Frank says "access to the American market is a potent bargaining chip. The United States could seek approval to tax imported goods in proportion to their carbon dioxide emissions if exporting countries failed to enact carbon taxes at home."
This idea of "carbon tariffs" have been around for a while, championed notably but briefly by former French president Nicolas Sarkozy a couple of years ago. Such a move, however, would cause major trade disputes and might prove very difficult to manage.
The $300 per ton carbon tax is a "fairly simple and cheap technical solution," Frank concludes. "If the recent meteorological chaos drives home the threat of climate change and prompts action, it may ultimately be a blessing in disguise."
Would you favor such a high carbon tax? Is that type of mood better than a cap and trade program? Let us know your thoughts at the Feedback button below.