The Carbon Tax

On July 5, the New York Times Op Ed Page had a very well written piece by Yoram Bauman and Shi-Ling Hsu in which they outlined the benefits of the new British Columbia Carbon Tax (BCCT). A carbon tax is just that. A tax on the carbon contained in fossil fuels.

As they noted, the BCCT tax increased from $25-$30 per metric ton. They further noted that due to this tax increase, the corporate income tax rate was decreased from 12% to 10%.

CO2 EmissionsI am not going to discuss the value of reducing CO2 emissions; that is almost secondary to my mind in some ways. I view this tax method as a means of encouraging conservation. Thus, it encourages users to find better and more efficient means of using the energy that they need.

Since the carbon tax is a tax on the use of energy, and you control your energy consumption, you control your energy bill, thus you control your carbon tax paid (if you live in British Columbia). It is similar in some ways to those who advocate volume based garbage rates, or other forms of user fees.

I agree with the authors concept that a well constructed carbon tax should be constructed with means to help low – income people obtain energy conservation improvements. I would go further and say that some of this money should be used to offer tax credits to businesses, especially small business for the same purpose.

As the authors noted, a $30 carbon tax in the U.S. would generate about $145 billion per year. Even if individual and corporate taxes were reduced by 10%, there would be $35 billion left over to initiate new programs. If the authors are correct, this is a truly revenue neutral concept worthy of further discussion.

It is certainly more intelligently thought out than the Drill baby drill ideas that we hear today.

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