Carbon Taxes for Clean Technology Innovation

Carbon taxes, implemented separately or jointly with other economic incentives, could help reduce the number of climate change hazards.

| August 2014

  • "Carbon taxes on fossil fuel energy production could enable renewable energy mechanisms and other “clean” energy technologies to compete on more even market-price terms."
    Photo by Fotolia/Francesco Carta
  • “Climate Change Policy Failures” by Howard A. Latin argues that nearly all of the climate change policy makers have been making mistakes, and offers suggestions for alternatives solutions to minimizing hazards.
    Cover courtesy World Scientific

The majority of climate change programs employed by developed nations rely heavily on greenhouse gas emissions-reduction. Rather than adopt ineffectual programs Climate Change Policy Failures (World Scientific, 2012) by Howard A. Latin suggests a shift to a “clean” technology replacement that could support current lifestyles and expanding development without further damage to our climate. The following excerpt, from Chapter 2, considers carbon taxes as an alternative to current economic incentive programs.

Carbon Taxes, Fees, or Charges

Carbon taxes, fees, and charges are synonyms for the same climate policy instrument, which could serve a number of important purposes in promoting climate improvement efforts. Greenhouse gas (GHG) taxes, especially taxes on carbon dioxide emissions, could be used to raise revenues that will support mitigation, adaptation, and technological innovation programs. The carbon taxes could be imposed to deter or penalize environmentally harmful activities. The taxes could sometimes help correct market prices that have been distorted by externalities and misplaced subsidies. Selective user taxes could also help shift consumption choices toward less destructive activities.

The revenue-collection function of a carbon tax, fee, or charges program would be vital in the climate change context because expensive technological and behavioral alternatives must be available to achieve the necessary transformation to a low-GHG economy and society. It is equally important that international climate programs receive substantial financial resources to pay for GHG-free technology transfers and other forms of foreign assistance to developing nations that would enable them to curtail their GHG discharges without sacrificing increased economic development.

A tax on GHGs supposedly could be used to “level the market system playing field” by offsetting the effects of negative externalities and inefficient or inequitable subsidies. Indeed, pollution is the classic harmful externality because polluters normally do not bear a substantial proportion of the social costs of their activities. As Sir Nicholas Stern, the noted British economist and climate expert, observed: “Greenhouse gas (GHG) emissions are externalities and represent the biggest market failure the world has seen.” A carbon tax could go beyond merely “leveling” market system prices for competing enterprises by imposing a much higher price on fossil fuel uses in order to give “clean” energy competitors a significant market advantage.

A carbon tax could sometimes help deter destructive activities, such as discharging high levels of industrial GHG pollution or high levels of fossil fuel pollutants from motor vehicles, which contribute substantially to the growth of the atmospheric GHG concentration. This kind of deterrent “sin tax” could be combined with revenue-generating and market-leveling functions to promote several desirable purposes with one fiscal instrument. The function of a carbon tax in this context is the straightforward one of attempting to reduce harmful activities by increasing their market prices. The tax may also encourage greater investments in technological innovation by firms attempting to find less costly ways to supplant targeted “dirty” practices.

8/13/2014 3:22:05 AM

While I agree with most of what Mother Earth News publishes, I disagree with carbon taxes. It doesn't work. They tried it in Australia and it was recently repealed because it just didn't work out the way the socialist Greens Party imagined it. I believe in saving the environment, but the environmental movement has been taken over by socialist/communist organizations. The carbon tax idea is designed to do nothing more or less than bring first world countries down to a third world level with an elite ruling class who do not follow the rules.

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