The carbon tax

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Tobacco and alcohol are taxed. Why can’t we do the same thing for carbon? In the first two cases, the tax covers the social and medical costs of the related nuisance. The carbon tax would cover the environmental cost of greenhouse gases. On one hand, putting a price on pollution would encourage everyone to reduce emissions and on the other hand, it will allow governments to collect money to fund clean energy and prepare for the future. A 20 dollar tax per ton of carbon emitted would raise 265 billion dollars a year in OECD countries.

In Denmark, the introduction of a carbon tax led to a 6% decrease in CO2 emissions between 1988 and 1997 whilst the growth rate was 20%. In 1997, the level of this tax was increased and this led to a 5% reduction over a year. Several countries including France are now considering taking similar measures.

The concrete practical details of setting up a carbon tax are still complex. Who will be subject to it and what will it cover? The « polluter-payer » principle could be applied. This would mean that each person who emits GEGs will have to pay tax depending on their GEG emissions. But should emissions be targeted at the source or once the product is finished? How can we calculate the energy consumption or the carbon impact caused by producing and transporting products? And how can we stop the tax crippling the poor?

The application of such a tax to international trade has even been considered: it would apply to products from countries that don’t enforce the Kyoto Protocol or countries that aren’t taking any steps to fight global warming. Such a system would be advantageous because it would fight against environmental dumping but it would also be very hard to put in place. Also, it could resemble protectionism which is against World Trade Organisation rules.


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