Don’t Tax Carbon—Just Stop Digging It Up

For alternate perspectives on this issue, see ​“The Government Should Write Everyone a Check — Paid for by a Carbon Tax” by Owen Poindexter and ​”Some Economists Say Carbon Taxes Are a Silver Bullet. The Reality Is More Complicated.” by Kate Aronoff.

Owen argues that a carbon tax and dividend could cut carbon emissions while contributing to the general welfare, but the model is deeply flawed. Indeed, any carbon tax — whether the revenue is redistributed as dividend or not — would be both ineffective and regressive. We should shift our energies toward climate solutions that eliminate fossil fuels altogether.

For starters, actually existing carbon taxes from Canada to the Netherlands have, at best, reduced carbon emissions only modestly. Look at British Columbia: In 2008, the Canadian province implemented a carbon tax with revenues returned through dividends and income tax rate reductions. While the province’s emissions declined in the program’s first year, they rose again in subsequent years.

The environmental group Food and Water Watch (FWW) indicates that the type of emissions subject to the tax actually increased in British Columbia between 2011 and 2014, while untaxed emissions went down. As a result, FWW concluded, ​“It appears that the British Columbia carbon tax has had no beneficial long-term impact on greenhouse gas emissions.” The report speculates that a lack of adequate public transit (meaning individuals rely on cars regardless of the increased price of gas) and the promise of a dividend and lower taxes (which meant people and businesses didn’t mind paying slightly higher energy prices) contributed to the policy’s failure.

But the problems run deeper. Market-based approaches such as a carbon tax are accepted by the fossil fuel industry because they do not actually threaten the ongoing and continuous extraction of oil and gas. In a statement on the 2015 United Nations climate talks in Paris, ExxonMobil endorsed a carbon tax as ​“the best option” to address climate change while ​“let[ting] the market drive the selection of solutions.” But the market by itself cannot set in motion a process of reducing carbon emissions toward zero, nor address the larger structural inequalities that are becoming ever more apparent.

According to Basav Sen, climate justice project director at the Washington, D.C.-based Institute for Policy Studies, ​“A price on carbon is like a sales tax — it doesn’t make polluters pay for greenhouse gas pollution. It makes end users pay.” By contrast, he says, ​“A regulator solution that phases out fossil fuel extraction and use can be designed to penalize those who are responsible for the problem, not everyone else.” This direction is where we need to go.

Owen argues that the financial burden of a carbon tax could be outweighed by a dividend, while others propose that carbon tax revenues should be used to implement climate solutions in frontline communities. But, as Sen points out (and Owen concedes), if a carbon tax were actually effective, revenues would decline as emissions decrease. The tax itself is not a reliable source of funds for either idea.

There is no evidence that the fossil fuel industry, with its powerful lobby in Washington, would permit a carbon tax to be set high enough to actually compensate for the vast harm the industry has done (and continues to do) across the globe, especially in communities near the sites of extraction.

The belief that a tax-driven process is possible distracts from the more complex and deep-reaching political changes necessary to drastically cut carbon emissions, such as regulating against the extraction and use of fossil fuels and seeking the best and most inclusive ways of transitioning toward a regenerative economy — one that doesn’t leave vulnerable people and communities behind. For instance, governments worldwide provide an estimated $775 billion to $1 trillion annually in subsidies to fossil fuel corporations (not including the social costs that get shifted onto the poor by climate and health impacts and such externalities as military interventions). It can be argued that the fossil fuel industry would not be viable if it were forced to adhere to a strict business model without subsidies and tax breaks.

Ending subsidies would be a start. But a carbon tax is not the answer.

For alternate perspectives on this issue, see ​“The Government Should Write Everyone a Check — Paid for by a Carbon Tax” by Owen Poindexter and ​”Some Economists Say Carbon Taxes Are a Silver Bullet. The Reality Is More Complicated.” by Kate Aronoff.