Carbon tax

To limit and control the amount of carbon dioxide (CO₂) added to the atmosphere , special taxes, called carbon taxes, have been proposed and in some cases adopted, on fuels containing carbon. Fuels such as coal , gasoline , heating oil, and natural gas , release energy by combining the carbon they contain with oxygen in the air, to produce carbon dioxide. Increased use of carbon-containing fossil fuels in modern times has greatly increased the rate at which carbon dioxide is entering the atmosphere. Measurable increases in atmospheric levels of the gas have been detected. Since carbon dioxide is the principle component of so-called greenhouse gases , changes in its concentration in the earth's atmosphere are a concern. Increases in the level of carbon dioxide, and other greenhouse gases such as methane , nitrous oxide , ozone , and man-made chlorofluorocarbons can be expected to result in warmer temperatures on the surface of the earth, and wide-ranging changes in the global climate . Greenhouse gases permit radiation from the Sun to reach the earth's surface but prevent the infrared or heat component of sunlight from re-irradiating into space.

The wide spread concern over the possible climatic effects of increases in heat-trapping gases in the atmosphere was exemplified by a 1994 report of the Intergovernmental Panel on Climate Change (IPCC) which concluded that unless greenhouse gas emissions were curtailed, average global temperatures would rise 2.5–8.1° F (1.4–4.5° C) by the year 2100. A 20% reduction in emissions over 20 years was recommended and considered feasible in developed countries. It was recognized that the rapidly expanding economies of many developing countries makes similar reductions less likely.

While limiting the buildup of heat-trapping gases in the atmosphere has been a goal of natural scientists for some time, many economists have now joined the effort. In 1997, 2,000 prominent economists, including six Nobel Laureates, signed the "Economists' Statement on Climate Change" stating that policies to slow global warming are needed and are economically viable. The economists agreed with a review conducted by a distinguished international panel of scientists under the auspices of the IPCC that, "The balance of evidence suggests a discernible human influence on global climate." They further stated that, "As economists, we believe that global climate change carries with it significant environmental, economic, social, and geopolitical risks, and that preventive steps are justified." They state that economic studies have found that potential policies to reduce greenhouse-gas emissions can be designed so that benefits outweigh costs, and living standards would not be harmed. They claim that United States productivity may actually improve as a result. The statement goes on to claim that, "the most efficient approach to slowing climate change is through market-based policies" rather than limits or regulations. The economists also suggest that, "A cooperative approach among nations is required, such as an international emissions trading agreement." They recommend, "market mechanisms such as carbon taxes or the auction of emissions permits." Their statement goes on to suggest that, "Revenues generated from such policies can effectively be used to reduce budget deficits or lower existing taxes." New taxes are never popular, but are more apt to be accepted when the revenue is used to replace other taxes or to aid the environment .

As in any public policy debate, views of even well-qualified experts are often sharply divided. Some industry representatives and scientists are unwilling to accept the premise that greenhouse gas emissions represent a serious threat. Industrial spokesmen continue to claim that efforts to reduce greenhouse gas emissions through taxation or other economic means are not cost effective, and would devastate the economy, cost jobs, and reduce living standards. Individual countries worry about the impacts on their competitiveness if other countries do not adopt similar measures. The potential impact on low-income groups must also be considered. Some are concerned that the taxes have to be high to be effective. The amount of year to year variation in climate and temperature throughout the globe, provide ample room for differences of opinion.

International attention was focused on the need to reduce greenhouse gases at the United Nations sponsored Earth Summit held in Rio de Janeiro in 1992. The conference was held to attempt to reconcile worldwide economic development with the need to preserve the environment. Representatives of 178 nations attended, including 117 heads of state, making it the largest gathering of world leaders in history. Documents and treaties were signed committing most of the world's nations to the economic development in ways that were compatible with a healthy environment. A binding treaty called "The Framework Convention on Climate Change, or Global Warming Convention" was adopted, requiring nations to reduce emissions of greenhouse gases. The treaty failed to set binding targets for emission reductions, however. Agreement was hampered by discord between industrialized nations of western Europe, and North America and developing nations in Africa, Latin America, the Middle East and Asia. Developing countries were concerned that environmental restrictions would hamper economic growth unless they received increased aid from developed nations to enable them to grow in an environmentally sound way.

National and regional efforts to limit greenhouse gas has been most evident in western Europe, although disagreements between countries have prevented a unified approach among members of the European Community (EC). Britain has refused to accept a proposed carbon and energy tax, favored by several nations. Spokesmen for Britain expressed doubt that the tax would achieve desired reductions, and claimed that the two-thirds reduction in emissions to which Britain was committed would result from a planned enactment of a value-added tax (VAT) on fuel and energy. Critics of Britain's position argued that their plan was not sufficiently focused because it did not specially target fuels that increase atmospheric carbon dioxide. A 1996 report from the European Environmental Agency (EEA) in Copenhagen concluded that "green taxes" adopted by individual European countries in the last decade have been successful. So-called green taxes are a variety of environmentally friendly tax measures intended to reduce pollution and toxic wastes and encourage efficient resource use. Carbon taxes, such as those enacted in Norway and Sweden in 1991, are one example. Other examples include taxes on sulfur and nitrogen oxide emissions, water pollution charges, and charges for household waste . The carbon dioxide tax in Norway was reported to have reduced CO₂ emissions by 3–4%. The goal in the Scandinavian countries and the Netherlands has been to move away from taxes on labor or capital to those on energy and the environment . The consensus in western Europe seems to be that current environmental policies are weighted too much in the direction of regulation, and that there is a need to provide economic incentives in the form of well-designed environmental taxes.

Although eastern European countries have moved forward more slowly than in the rest of the continent, Poland, Hungary, and Estonia are beginning to adopt environmental charges and taxes. In the far-east, the Japanese Environmental Agency has reported that Japan might be able to keep per capita emissions of carbon dioxide at 1990 levels, which would result in a small increase in total emissions because of population growth .

The effectiveness of green taxes, including carbon taxes, is not universally accepted. Some argue that goals need to be defined more carefully with specified amounts or percentages of reduction in targeted pollutants. The EEA report acknowledges that the evaluation of the effectiveness is difficult and that, "Judgments about the performance of green taxes remain at the level of best guesses." Although theoretical evaluation of environmental taxation is well-developed, adequate evaluation of practical experience with such taxes is still relatively rare. Proper evaluation must separate the effects of green taxes from other factors, and assess what would have happened without the taxes. It is also recognized that it may take as much as a decade for a tax to have the desired effect.

In the United States, the Clinton administration, in 1993, published a 50-point plan to reduce greenhouse gas emissions by 100 million tons through a number of voluntary measures. Among the steps recommended were greater energy efficiency in homes and electrical appliances, reduced emissions from power plants , greater reliance on hydroelectric power, and increased tree planting. Some observers believe that the prospects for "green taxes" are less favorable in the United States than in Europe because of difficulty of passing legislation through two houses of Congress, which may be controlled by different parties, and obtaining approval by the president. Some individual states, however, have enacted measures that create economic incentives for environmental protection. Louisiana, which has many petrochemical companies within its borders, created an "environmental scorecard" in 1991, to keep a tally of companies' toxic discharges, waste volumes, and compliance with environmental laws. Graded exemptions from property taxes are granted to companies with good scores. Oregon's Energy Facility Siting Task Force recommended establishment of a standard to reduce emissions of carbon dioxide, with provisions for offsets for planting trees (which remove CO₂ from the air), and for the use of renewable energy sources.

[Douglas C. Pratt ]

RESOURCES

PERIODICALS

Burke, M. "Environmental Taxes Gaining Ground in Europe." Environmental Science & Technology 31 (1997): 84-88.

Environmental Taxes: Implementation and Environmental Effectiveness; Environmental Issue Series No. 1. European Environment Agency: Copenhagen, 1996.