Saving the World, One New Tax at a Time

Everywhere you look there are inevitably headlines about the imminent threat of climate change. The oceans are rising, the ice caps are melting, and the forests are burning. The Green New Deal could be a game changer in helping to slow down some of these harmful impacts of climate change. That being said, rather than focus on how exactly policy will help address these issues, there is a much greater focus on the grand vision of what will be accomplished.

This plan has lofty goals of both limiting climate change while also addressing social and economic concerns of the nation. These end goals are important but less so compared to the method in which they are achieved. It would be incredible to have complete world peace but as we have no feasible plan to accomplish this grand vision, we are stuck with the reality of a violent world.

Eventually, the focus will shift from the goals of this program to the present and what exactly needs to be done today, to live in a better world tomorrow. One of the most basic instruments in dealing with pollution on a policy level, which will almost certainly be employed, is the carbon tax. This tax could take many different forms ranging from a simple monetary fee placed on units of carbon pollution (tons CO2e/cap) to a much more interesting trade system. The Cap and Trade System helps to create a free market for pollution resulting in a cost directly controlled by those polluting.

Within this method, the government would assign a limit to the amount of pollution for the entire country. They would then, create and hand out pollution permits to companies, thus allowing them to pollute. Pollution permits would then be treated as a commodity to be traded between companies who wish to pollute. This would work similarly to the stock market, companies who are large polluters would be forced to spend massive amounts of money to purchase permits from other companies in a market atmosphere to determine prices. The government could then impose a tax on these permits similarly to a property tax to even further incentivize major polluters to clean up and decrease their pollution.

In order to further limit the pollution, as the nation moves towards clean and renewable energy, the government would then reduce the amount of pollution permitted per permit. For example, if this year a permit is worth 100 million tons CO2e/cap, next year it may depreciate and be worth only 90 million. This would enable a gradual reduction in carbon emissions while mitigating the impact on business. The gradual reduction would help reach the goal of zero emissions, while providing business with enough time to find alternate sources of energy.

The Cap and Trade System only works effectively with larger industries because of the permit trading. If every American who owns an automobile were to attempt to buy and sell pollution permits, chaos would ensue. Because of this, a different measure must be employed to deal with cars. In this situation, a simple carbon tax appears to be the best solution mainly because of the simplicity. When it comes to dealing the nearly 260 million cars producing carbon emissions, the easier the solution, the better the result. This tax would basically require people to pay a fee depending on how much carbon is released into the atmosphere, nice and straight forward.

While taxation is the one of the main tools employable by the government, those who have a vested interest are also making an effort to limit their carbon footprint while simultaneously preparing for a world with climate change.

Read more next week!

About Declan Peloso

Declan is a second year Economics and Business student, focusing on finance at the University of Puget Sound

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