Carbon tax and the potential impacts

As concerns over the changing climate grow, more and more countries are being pressured into reducing the harmful emissions they produce. One way that governments can approach the situation is the implementation of a carbon tax. The idea of taxing carbon emissions has increasingly grown in relevancy as more and more countries have proposed its implementation, sparking heated debate the world over.

When discussing the carbon tax, it is important to understand why carbon emissions may need to be taxed in the first place. All fossil fuels are composed of hydrocarbons, the differences come from the specific ratio of hydrogen and carbon (For example, coal has a high carbon to hydrogen ratio, whereas natural gas has a low carbon to hydrogen ratio). When these fossil fuels are combusted, the hydrocarbons react with oxygen to produce large quantities of energy. A by-product of this reaction is the formation of carbon dioxide.

In the photo: some immediate aesthetic affects of burning fossil fuels. Photo Credit: CCO Public Domain

But why should that be a reason for concern? After all, don’t plants need carbon dioxide to grow? While it is true that carbon dioxide is necessary for photosynthesis in plants, the amount that is currently being produced far surpasses what plants can handle on their own. The excess carbon dioxide escapes into the atmosphere, and an unnaturally high concentration of carbon dioxide in the atmosphere has many negative repercussions. Two of the most severe are as follows:

  1. Carbon dioxide is one of the most common greenhouse gasses. Since the Industrial Revolution in 1750, human activities have increased the concentration of atmospheric carbon dioxide by 40%. The “greenhouse” effect of this is comparable to the way the interior of a car heats up in the summer. Light from the sun reaches the Earth, but the rising levels of carbon dioxide in the atmosphere keep more and more heat trapped inside. According to NASA and the Intergovernmental Panel on Climate Change (IPCC), the next few decades could see an increase in sea level by around 1 meter, frequency and intensity of hurricanes, and droughts among other things as a direct result of increasing temperatures.
  1. Like water, not all carbon dioxide in the atmosphere will remain there. Carbon dioxide dissolves easily in water, forming carbonic acid. As more and more of this carbonic acid enters the ocean, it gradually increases the acidity. This acidification has a drastic effect on all sea life. For example, the Great Barrier Reef is currently eroding faster than it can repair itself, and it is predicted that it may experience up to a 95% decrease in the variety of marine species living there. As of now, more than half of all coral in the Great Barrier Reef is dead.

In the photo: a global average temperature graph. Photo credit: NASA

Compared to the problems being faced, the theory behind the carbon tax policy is relatively simple: Make it economically unprofitable to produce carbon emissions. In other words, encourage companies to seek more environmentally friendly production methods by putting a price on the burning of carbon-based fuels, such as coal, oil, and gas.

Aside from slowing the previously mentioned environmental issues, there are also some potential economic benefits. Revenue from a carbon tax could encourage governments to reduce taxes in other areas, putting more money in the pockets of its citizens. In addition, fossils fuels are a limited resource, and there are serious concerns about the consequences of depletion. Finding sustainable alternatives reduces dependency on fossil fuels, and therefore also reduces the potential consequences of running out.

Countries that have implemented a carbon tax have seen mixed results. The carbon taxes in Norway are among the highest in the world, but a study found that despite this, there was only a modest effect on carbon emissions. It was estimated that the taxes in isolation were responsible for a 2.3% reduction in total Norwegian emissions.

Though not an insignificant amount, the reduction is perhaps not as high as proponents of the carbon tax would hope. The researchers who conducted the study hypothesized that the “surprisingly small effect” is a result of tax exemptions in areas where the carbon tax would have worked the most.

In the photo: Oil wells are a large producer of greenhouse gases. Photo credit:Robert Lucian Crusitu – Shutterstock

As is the case with many environmental initiatives, the taxation of carbon emissions will only help solve the problem if most of the world’s countries are willing to implement it.

Currently, of the worlds 10 highest producers of carbon emissions, only Canada has proposed any legislation regarding the taxation of carbon. This is a common issue among environmental policies. In order for them to work, nearly all of the major countries must agree to participate. If nations such as China opt out, the taxation of carbon will not be as effective. This effect is amplified for every country that does not participate.

Of course, the carbon tax is not without drawbacks of its own. Critics argue that it will be the citizens of the country, and not the corporations, that will end up paying the tax. If it costs more to provide a good or service, companies will shift the expense down the line, increasing the price consumers pay to compensate.

The most obvious repercussion of this is an increase in the price of gas. Most people require a car to get to work, and a higher refueling cost is a direct hit to the wallet. It is for this reason that some argue a carbon tax would hurt the middle and working classes.

Another common criticism comes not from the carbon tax itself, but rather from the suspicion of ulterior motives for its implementation. The ongoing yellow vest protests in France were ignited by French President Emmanuel Macron’s carbon tax hike. Not only angered by the sudden increase in the cost of living, there was also a widespread belief that the primary goal of the carbon tax was not environmental conservation. Rather, it was suspected that it was a way to generate more money for extranational interests.

Events such as these demonstrate why the carbon tax and other climate proposals are controversial. The involvement of politics complicates any issue, and the environment is no exception.

In the photo: Yellow vests protest, Paris. Photo credit: AFP Lucas Barioulet

The proper implementation of a carbon tax entails more than simply putting a price on carbon dioxide emissions and calling it a day. For example, by what metric should carbon emissions be measured? What about processes that don’t involve combustion, such as the manufacture of cement?

These questions do not have easy answers, and finding the best possible solution is a challenge for scientists and politicians alike. Thanks to ongoing developments in the tech industry, the tools used for environmental study grow better every day. Computer simulations have allowed researchers to study the effects of different variables on the environment at the press of a button.

The collection and compiling of information on carbon emissions is essential to counteracting climate change, as the insight the data provides helps scientists test hypothesis and generate new theories. A comprehensive report on a theoretical carbon tax for the United States proposed the following attributes:

  1. The carbon tax should also apply to carbon dioxide equivalent compounds, such as methane and nitrous oxide;
  1. The tax should be equal to the amount of damage caused by the emissions (simulations predicted this amount to be approximately $42 USD per tonne);
  1. The tax should be applied to imports, but not exports, to prevent production shifting out of the country;
  1. Regulations that would be covered under the carbon tax should be removed and existing tax subsidies for the use of renewable resources should be incorporated;
  1. Increased costs associated with the carbon tax should be offset by cutting taxes in other areas.

The guiding principle is that the carbon tax should help the environment as much as possible while remaining a net-neutral policy. If a carbon tax policy was a financial burden on the general population, it wouldn’t last long enough to make a difference. Ideally, there would be no negative repercussions for the average citizen.

With environmental issues an ever-present subject of discussion, it is clear that the debate over carbon taxation will not be going away anytime soon. Climate change is one of the most pressing issues of our time and must be dealt with sooner rather than later. As ideas about carbon taxation grow more mainstream, the next few years may see it becoming the key hot-button political issue. What the future holds remains to be seen, but in the decades to come a carbon tax might just be the best option for avoiding a climate change related disaster.

Editors Note: The opinions expressed here by columnists are their own, not those of – Featured Photo Credit: Diana Parkhouse on Unsplash
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Andrew is a science major currently studying in Canada. He can be found on Twitter @GroovyAS

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