How to raise revenue and reduce pollution

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To Cut Carbon, Tax It

By: John Horton

Last week, over 300 U.S. cities experienced record high temperatures. This is no surprise since climate scientists agree the current levels of pollution and carbon emitted into the environment are causing temperatures to rise at dangerous levels worldwide. According to National Geographic, "average temperatures have climbed 1.4 degrees Fahrenheit (0.8 degree Celsius) around the world since 1880." This negative side affect of otherwise normal business and human behavior must be combated in order to preserve future food supplies, coastal locales, and polar wildlife. In addition, scientists report that an increase in dangerous weather events, like the recent Superstorm Sandy, are more likely in the future if no action is taken to address our changing climate. While each individual who chooses to bike, eat local food, or buy a hybrid car helps in their own way to reduce pollution, it is imperative for a national policy to be enacted to reduce carbon emitted into the atmosphere. Taxing carbon emissions should be that policy.

Current attempts at a solution are increasingly impotent. The Obama administration, arm-tied by public opinion and opposition in Congress, has resorted to capping emission levels through the Environmental Protection Agency (EPA). Simply put, business and corporations are allowed to pollute a certain levels and if found in violation of those levels face fines and penalties.

Level caps result in no incentive or competitive advantage to reduce pollution. They merely create an inconvenience for businesses that must choose between two options. If it makes economic sense to reduce pollution, a business will choose to do so. But, if it is less expensive to pay the fine, the businesses will choose this course. Once this choice is made, nothing more will be necessary. There is no incentive to keep reducing carbon, only a motivation to cap emissions at a specific pre-ordained level.

A carbon tax would be economically efficient, spur innovation, and increase competition. Another plus from a carbon tax is increased revenue to the federal government. This revenue could be used to reduce other taxes or balance the federal budget-- both powerfully persuasive opportunities. Estimates range from 500 billion to 800 billion in additional revenue a year coming from a carbon tax. This is the same amount of revenue lost due to the Bush tax cuts over the last ten years. A carbon tax could work like the income tax by bracketing the amounts of carbon emitted like the income tax and make businesses pay rates that correspond with the harm of their polluting.

No new regulators, regulations, or bureaucracy that too often accompanies new dictates from Washington and can create economic deadweight would be necessary. The tax would enable businesses to simply monitor their polluting rate and pay the corresponding tax-- increasing productivity and efficiency. Having differing tax rates for differing levels of pollution would incite businesses to find innovative solutions on their own. This incentive for newer and cleaner technologies would also reduce the need for government sponsored research and development grants, while allowing those who reduce pollution the most to gain a competitive advantage over their competitors who pollute more.

Using taxes to correct negative externalities, or unpleasant side effects caused by normal human and market behavior, is not abnormal. Every time individuals gas up their vehicles at an Exxon station they are paying a corrective tax on gasoline that is then reinvested in road and other infrastructure projects that are needed to maintain the transportation system. This tax is simply a response to the results of using a car and is then used to return societal possessions to a more optimal state. A carbon tax would be no different.

There is a moral imperative to beginning the process of curing the planet immediately. Just as complaints concerning leaving debt and deficits to the next generation are well founded, so is the injustice of passing on a harmed, depleted, and polluted planet to those citizens yet to inherit the earth. Instituting a carbon tax is the best response to this known, growing, but yet still solvable crisis.

Authors Bio:
John Horton is a policy analyst. He has co-authored op-eds in the Miami Herald, Florida Sun-Sentinel, Michigan Chronicle, and Tallahassee Democrat. He currently resides in Washington, DC.