Wednesday, March 02, 2016

Climate Change: Carbon taxes work

Climate change deniers and fossil fuel shills like to claim that putting a price on carbon will "destroy the economy". They're wrong:

In 2008, the British Columbia Liberal Party, which confoundingly leans right, introduced a tax on the carbon emissions of businesses and families, cars and trucks, factories and homes across the province. The party stuck to the tax even as the left-leaning New Democratic Party challenged it in provincial elections the next year under the slogan Axe the Tax. The conservatives won soundly at the polls.


The tax, which rose from 10 Canadian dollars per ton of carbon dioxide in 2008 to 30 dollars by 2012, the equivalent of about $22.20 in current United States dollars, reduced emissions by 5 to 15 percent with “negligible effects on aggregate economic performance,” according to a study last year by economists at Duke University and the University of Ottawa.

The tax made fuel more expensive: A gallon of gas, for example, costs 19 United States cents more. It encouraged people to drive somewhat less and be more careful about heating and cooling their homes. Businesses invested in energy efficiency measures and switched to less polluting fuels.

Of course, British Columbia did it right, recycling the revenue into reducing other taxes. And as a result, public support for the carbon tax has increased. They could still do better (e.g. by recycling into emissions reduction as well), but the core policy lesson stands.

Its also a picture of what might have been. Up until 2005, we were on track for a carbon tax with revenue recycling. But Winston Peters and Peter Dunne vetoed it after the 2005 election. And so now we're saddled with an ETS which simply doesn't work, and sees us effectively spend hundreds of millions a year subsidising pollution.