Green Bucks: Decoding Carbon Taxes
Neo Verma
26 Nov 2023
The world has recently been tackling the excessive usage of greenhouse gas emissions, in an attempt to stop the negative effects it has on the climate crisis and the environment. Carbon taxes are a beneficial and somewhat underutilized solution in this fight: this approach aims to not only reduce pollution from major emitters, but also creates real economic incentives to innovate and develop technologies for a more sustainable future.
Carbon taxes are pretty simple: They are payments that businesses and gas-emitters have to make to the government for each ton of greenhouse gas emissions that they emit (“Carbon Tax Basics”). Since there is a monetary downside for producing emissions, this policy encourages industries to innovate towards more environmentally-friendly and sustainable business practices.
The main objective of any business is to make as much profit as they can. This leads to them making disadvantageous choices against the environment, and thus governments need to step in to reduce the external social costs that the general public faces as a result of this. Carbon taxes raise the cost of production businesses face, and so they are forced to produce fewer goods. To make up for these lost profits, they attempt to move to more green solutions in order to comply with regulations.
About 83 jurisdictions have implemented carbon taxes so far worldwide, covering about a quarter of global greenhouse gas emissions in 2022 (“Carbon Tax”). Although this is a good start, there are notably many large CO2 emitting countries that have not signed on yet, despite declaring intentions to become increasingly carbon neutral. Some of the major countries include the U.S which is the second largest producer of carbon emissions, as well as Saudi Arabia which is the eleventh largest as of the time of writing (“CO2 Emissions by Country”). There are certain calls for action regarding the addressing of these issues. For example in the US, there have been multiple votes on the topic of implementing carbon taxes in different states. In the state of Washington, there was an initiative on the carbon emissions fee measure called “Initiative 1631.” It was voted against with 56% of the people saying no to the initiative. A major argument used against the carbon tax was that the measure would not reduce global carbon emissions and that the fee could instead result in citizens paying more per gallon of gas if oil refineries raised the price of the good instead of lowering the supply (“Washington Initiative 1631”).
Carbon taxes provide a lot of benefits to the environment as well as to society. They are an effective solution to combating greenhouse gas emissions and the ongoing climate crisis. While significant progress has been made to adopt policies worldwide, there are still major improvements that can be made by pushing remaining jurisdictions to enact change in an effort to improve overall sustainability and wellness. As we strive for a more sustainable future the utilization of carbon taxes rely on global and local collaboration with governments and businesses cooperating in a collective commitment to balance economic interests with environmental responsibility.
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