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Posted on Apr 11, 2017

Carbon Tax – Yesterday’s Approach

carbon taxMany herald a Carbon Tax as our best policy to solve the problem of climate change. There is a better solution. The goal of any climate change policy is to reduce greenhouse gas emissions. The Carbon Tax proposes to achieve this reduction by placing a tax on fossil fuels. Different fuels would be taxed at different rates. The theory is that the higher cost of fossil fuels will decrease the demand for these fuels and increase the competitiveness of renewable energy. It would also increase the demand for natural gas. The plan is to make the carbon tax revenue neutral so the tax on fossil fuels would be complemented by a decrease in the personal income tax or a “green dividend” on the tax returns.

Does a carbon tax work?

British Columbia instituted a carbon tax in 2008. This has been praised as a success story. According to the World Bank the use of fuels covered by the tax has dropped by 16%. The tax has not hurt the economy with the per capita GDP of British Columbia greater than the Canadian average.

Using Canadian government data, the per capita emissions of greenhouse gases of British Columbia decreased 10.81% from 2005 to 2012. The province of Ontario does not have a carbon tax and the emissions decreased in Ontario 24.24% over the same time period. The Canadian average decreased 11.84%. The adjoining US state of Washington decreased emissions 19.2% from 2005 to 2011. The Canadian government predicts that British Columbia will increase per capita emissions 3.79% from 2012 to 2020. Ontario will decrease per capita emissions 8% by 2020, the Canadian average will fall 1.99%. The British Columbia Carbon Tax shows no clear advantage in reducing greenhouse gases.

How competitive is clean energy?

Deutsche Bank reported that solar electricity will be cheaper than or as cheap as average electricity prices in 36 states by 2016 if the tax credit drops to 10%. Solar electricity will be on parity in 47 states if the tax credit remains at 30%. The cost of storing the electricity from intermittent sources of renewable power is also declining. The cost of battery storage declined 14% annually from 2007 to 2014 and is on track to be at price parity by 2020. A Rockefeller Foundation/Deutsche Bank report states that reducing US building emissions just 10% would cost $ 279 billion in energy retrofits, with a payback of $ 1 trillion.

Does energy price manipulation reduce demand?

According to the US Energy Information Agency “Gasoline prices tend to have little effect on demand for car travel.” Gasoline is said to be an inelastic product. A change in price has little effect on the quantity demanded. Prices would have to change 25% to 50% to change the quantity demanded by 1%.

Where does the money go?

Carbon taxes are designed so they will not hurt the average person in the wallet. It is called Revenue Neutral. That is a good thing because many people do struggle to make ends meet. That is why there is a climate refund or a decrease in personal income tax. The money from the carbon tax does not go to directly creating the solution and there is nothing to stop that refund money from being spent on buying more fossil fuels. The carbon tax does not provide for the $44 trillion investment the IEA estimates it will take to keep global temperatures below 2 degrees Celsius. An investment that would result in a fuel savings of $115 trillion.

The carbon tax is a discouraging, negative approach that emphasizes the problem. When carbon free energy was so much more expensive than fossil fuels manipulating prices with a carbon tax could still be argued. Now many carbon free energy sources and energy storage costs are competitive with fossil fuels and prices continue to decline. The carbon tax argument is now yesterday’s approach. Today we need a positive and encouraging approach that emphasizes the solutions.

Carbon Xprint is a patent-pending process that allows individuals and companies to offset their carbon footprints by buying units of a term deposit in a financial institution. The unit price matches the cost of one ton of carbon dioxide or equivalent greenhouse gases (CO2e). The money from the investment goes toward financing energy-efficiency and renewable-energy projects. At the end of the term, the money is returned to the investor with interest, like traditional financial products such as savings bonds or CDs. In doing so, Carbon Xprint allows individuals and companies to take meaningful action to offset their carbon footprints. It does this in a way that is personal, easily accessible, measurable, and profitable.

Polls show that the majority of Americans want to do something about climate change and are willing to pay if something would be done. They want to do something but they do not want to give up what they have. Carbon Xprint channels this desire to take action and responsibility into a willingness to save, invest, and profit directly in creating pieces of the solution.

With Carbon Xprint money is put to work right away as part of the $44 trillion in capital needed to keep global temperatures below 2 degree Celsius and then the money is given back with interest. It uses existing infrastructure. It allows all types and sizes of companies to demonstrate measurable action. It personally engages individuals who have few options to do anything about climate change. Carbon Xprint could be started today without government intervention or bureaucracy. Governments could assist by continuing tax credits for renewable energy. They could allow Carbon Xprint deposits to be tax free. Governments could also provide credit enhancement and other risk reducing measure to banks for renewable energy and energy efficiency projects.

In the past we selectively beat around the bush with a carbon tax and cap-and-trade trying to make a transition to clean energy less painful. The game is changing. Today we can include everyone in this transition with measureable, meaningful, and profitable Carbon Xprint.