A Carbon Pollution Tax Could Have Many Benefits

Energy Independent Vermont is a growing coalition of environmental organizations and businesses trying to build support for a “carbon pollution tax” as a means of reducing consumption of fossil fuels. While the idea of yet another tax could, at first glance, seem as welcome as a root canal procedure, the campaign is asking Vermonters to consider the reasoning behind this proposal.

First, something more than concern for climate change is necessary to transform the economics of fossil fuels. As long as they are cheap (in large part thanks to existing national policies), they will be consumed, pumping carbon into the atmosphere, which increases the risk of extreme weather events like Irene. Giving consumers a financial incentive to use less is an effective way to cut carbon emissions. British Columbia instituted a carbon tax in 2008, and has reduced emissions by millions of tons.

Like other “green” taxes, a carbon tax aims to capture the externalized costs of a product or industry and build them into the price consumers pay. Fossil fuels, like industrially produced food, may appear to be a bargain but cost us down the road, in hidden ways. These products have a destructive impact on health, water quality, climate stability and other expensive goods. We’re going to pay anyway, so why not put the cost up front, which by reducing consumption can help us avoid the ill effects later?

A collective effort (e.g. a tax) is necessary because economic self-interest tends to externalize costs. But a collective effort to address climate change does not need to be a coercive one. Former Treasury Secretary Hank Paulson, a Republican, commented in a New York Times op-ed last June that “the solution can be a fundamentally conservative one that will empower the marketplace to find the most efficient response. We can do this by putting a price on emissions of carbon dioxide — a carbon tax.”

“Few in the United States,” Paulson noted, “now pay to emit this potent greenhouse gas into the atmosphere we all share. Putting a price on emissions will create incentives to develop new, cleaner energy technologies.” He added that “we must not lose sight of the profound economic risks of doing nothing.”

The carbon pollution tax proposed for Vermont seeks not only to mitigate the future economic risks of runaway climate change, but also to produce economic benefits now. Vermont sends hundreds of millions of dollars out of its economy to pay for fossil fuels. Developing more local, renewable energy sources will keep money circulating here. In addition, 10% of the revenue from the tax would be invested in renewable energy and efficiency businesses, producing jobs and lowering energy costs for homeowners.

A final selling point for the carbon pollution tax is that the other 90% of the money collected would be returned to Vermont citizens and businesses through rebates, credits and rate reductions, with a special emphasis on lower income households. The tax is not intended to provide state government with another revenue stream.

A nonpartisan research company, Regional Economic Models, Inc., estimated that the proposal would produce 1000 new jobs and provide an economic boost of around $40 million annually, while cutting carbon emissions by more than 1 million tons per year.

The tax would take the form of a fee per metric ton of carbon dioxide emitted and would be imposed upstream, on gasoline, oil, propane, natural gas and other fossil fuel distributors. The fee would begin at $5 per metric ton of carbon dioxide and continue to rise over the next ten years to approximately $50 per ton.

More information about the campaign can be found at energyindependentvt.org.

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