It looks like the carbon tax concept has been getting a bad rap. At a time when most people are unaware of the difference between cap-and-trade programs and carbon taxes, these two approaches to trying to control carbon emissions need to be better understood. The most important thing to remember is that the consumer pays either way.
Most people who object to a carbon tax start with the objection to a tax. After all, who likes taxes? You have to bear in mind though that cap-and-trade is also a tax. You pay either way. Cap-and-trade costs are paid for by the manufacturer and are added to the manufacturers’ wholesale price. And remember that retail mark-up and sales taxes are added to this higher price.
The difference between the two approaches is that you know the price of carbon emissions with the product when you pay a carbon tax. All you know with cap-and-trade is that the product is more expensive by the time it gets to the consumer.
With a carbon tax, the bill starts out the same to all manufacturers. You put so much carbon into our environment, here is what is going to cost you. It is simple, open and honest. The challenge is to the manufacturer to reduce the carbon emissions and reduce the tax. If the carbon is reduced, the tax is reduced. It is easy to see what is happening and all the figures are there for the consumer to see.
It seems this is not so with cap-and-trade. Caps on carbon emissions are set by industry in negotiation with government. The consumers only choice is to buy or not buy the product. If a manufacturer can lower the emissions, the company can sell or trade the unused emissions with other companies who cannot reach their emissions targets. Whether it earns any profits from such trades is a matter between the company and its shareholders.
The main concern with this not so transparent cap-and-trade is that companies are actually encouraged to move difficult emissions problems off-shore. With a carbon tax, companies both domestic and foreign would be challenged equally to reduce their carbon emissions.
It is also important to note that a carbon tax creates a level playing field for our manufacturers. If they sell to a country with no carbon tax, the only pressure is from their own and international environmentalists who want them to do their part. Cap-and-trade leaves our exporters with a more expensive end product and a disadvantage.
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Copyright 2016 © Peter Lowry
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