Also discussed here: World Energy Outlook Special Report 2013: Redrawing the Energy Climate Map (134 page pdf, International Energy Agency, Jun. 10, 2013)
Today we review a paper that examines the benefits and myths about carbon taxes and then suggests ways of implementing them in Canada. The main benefit which has been seen by administrations that have done it (such as British Columbia) is that it is 40%-90% less costly to implement than by regulation. The “unpopular” myth is contradicted by polls showing support by a majority of Canadians and business and even by oil companies whom politicians are trying to “protect”. The “ineffective” myth is proven incorrect from BC where emissions were reduced by 10% and in the UK where they fell by 18%. A simple tax on all carbon fuel burned is proposed with the main decision by government on what level to set the tax – which could be set to the social cost of carbon which has been at about $40/t CO2 which would raise about $25 B in revenue each year (enough to subsidize low income people impacted by the tax as well as to return revenue to the public as a whole through lower income taxes).
“with current climate policies, global mean temperature is likely to increase by between 3.6 and 5.3 ºC, with most of that increase occurring this century. This is far outside the temperature range experienced in the history of humanity” [International Energy Agency, 2013]
“The primary asset of a carbon tax (which is shared with other market-based instruments, such as cap and trade) is that it minimizes the cost of reducing emissions… costs of market-based policies are 40 to 95 percent lower than conventional regulatory instruments.”
“Myths associated with a carbon tax
- Carbon taxes are regressive… revenues from a carbon tax are easily large enough to compensate lower-income households enough to leave them at least as well off as prior to the tax.
- Carbon taxes are ineffective if other countries don’t do anything.. emissions leakage associated with unilateral regulation is likely between only 10 and 25 percent of the emission reductions associated with the policy, even if no additional measures are taken to curb leakage
- Carbon taxes kill jobs.. Preliminary evidence from British Columbia .. suggests that overall employment in that province increased as a result of the carbon tax.
- Carbon taxes are unpopular.. carbon taxes are supported by the strong majority of Canadians… “governments at all levels should commit to a national approach to GHG reductions and carbon pricing.”[Canadian Council of Chief Executives, 2010].”
- Carbon taxes are ineffective at reducing emissions.. British Columbia’s carbon tax likewise suggests a reduction in emissions attributable to the policy, with a reduction in emissions likely around 10 percent… the UK Climate Change Levy ..reduced emissions intensity in manufacturing plants by about 18 percent”
“reducing greenhouse gas emissions by 70 percent by 2050 would require a carbon price between $200 and $350/t CO2 (For reference, each litre of gasoline produces about 2.4 kg of CO2, so a $200/t CO2 tax would increase gasoline prices by almost $0.50/L.)”
“one potential choice for the level of carbon tax would be the social cost of carbon (SCC) .. is a measure of the present and future damage associated with emissions of greenhouse gases… is about $40/t CO2, and this value increases over time in real terms to about double that value by mid-century (at a rate of about $1/t annually).. A $40/t CO2 carbon tax would raise on the order of $25 billion per year.”