Carbon Tax: It's Back and Worse Than Ever

Carbon Tax: It's Back and Worse Than Ever

Last month in Aspen, Colo., several bigwigs of the environmental movement met at the American Renewable Energy Day conference. Participants included Jimmy Carter, Ted Turner, Theodore Roosevelt IV, and Rachel Kyte (the World Bank's special envoy for climate change). On top of the enormous amount of influence their names and positions alone carry, these figures are backed by millions of dollars of support.

At one point, Carter brought up a carbon tax, a notion that was met with applause and cheers -- and that returned to the news this week in the context of the U.N.'s climate summit. The tax, in its simplest form, requires businesses to pay for the amount of carbon dioxide output they produce. (No one has yet called for taxing the CO2 produced when humans breathe.)

The proposals under consideration in the U.S. apply only to large plants and the transportation industry. However, the costs of the tax would be passed through to these companies' customers, including local farmers and small businesses. The evidence suggests that economic damage of a carbon tax would be substantial, while the environmental benefits would be small. 

Several key lessons here come from Australia. The Australian government repealed its carbon tax after the scheme devastated small businesses.

One area hit particularly hard was the farming industry. The Australian government reported that "many agriculture, grower and forestry businesses consume high levels of energy to meet irrigation and processing requirements." That resulted in hefty price increases for fruits, vegetables, and grains.

When the tax was repealed, Australian prime minister Tony Abbott proclaimed, "Today the tax that you voted to get rid of is finally gone, a useless destructive tax which damaged jobs, which hurt families' cost of living, and which didn't actually help the environment is finally gone."

In America, meanwhile, a study commissioned by Citizen's Climate Lobby and conducted by Regional Economy Modeling claims that a revenue-neutral carbon tax would be economically beneficial in all but some southern states. It just so happens that these states rely heavily on farming and coal production.

Perhaps the increasing prices can be overlooked for the sake of helping the environment. But studies show that carbon taxes fail to significantly affect climate change. A ten-year study on Norway's carbon tax, conducted by the University of California San Diego, found that despite Norway's tax being one of the heaviest in the world, the "policy measure had only a modest influence on greenhouse gas emissions."

Although the goal of environmental sustainability trumpeted at the Renewable Energy Day conference is noble, we should ask Carter and his ilk to save their breath on more taxes. Instead, powerbrokers and wealthy investors should focus on making renewable energy sources more economically viable. Only then will clean energy take off.

Ethan Greene is a research fellow at the Taxpayers Protection Alliance, a nonpartisan, nonprofit educational organization dedicated to a smaller, more responsible government.

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