ECON 295: Introduction to Sustainable Development Washington and Lee University Spring 2018 Professor: James F Casey Email: caseyj@wlu.edu Class: MWF 9-12, Wilson Hall 2019 Office Hours: MWF 12-1 and TR by appointment Office Location: Holtkamp 119 Course Description In September 2015, the world adopted a set of Sustainable Development Goals (SDGs) for 2015-2030 to replace the Millennium Development Goals when they expired in 2015. These SDGs set targets for reducing poverty, protecting the environment, and increasing equality of opportunity for those who may have had less than equal opportunity in the past – These are the three pillars of Sustainable Development. The primary objective of this course is to provide an introduction to the concept, theories, and potential outcomes of sustainable development. In addition to this, we will take a case study approach and look at policies and programs that have aimed to address each of the
It was interesting reading about this Canadian tax plan, especially how early on it notes the partisan issues it faced, a theme similar to what would be seen in the United States if such a plan were to exist. I thought the idea of a time based tax step up by ton was interesting although I'm not sure if there tax redistribution made that much sense. If the original plan was revenue neutrality, then it seems as though the revenue would be need more direct exposure to the broader population as apposed to being distributed between low-income, income and corporate tax payers. I think that the "Conservative Case for Carbon Dividends" model of direct deposit into retirement funds makes a lot more sense. Not only can citizens see the direct effects of the tax plan, but it defers this spending towards the future, potentially diverting away from spending into carbon intensive activity. Another part of the paper that raised a question was the potentially lagged effects that a carbon tax could have. Although the author notes that the existing literature provides very different estimates as to the decrease in GHG emissions due to the tax, wouldn't the effects of the tax be more pronounced as time goes by? For instance, as taxes are introduced and stepped up, over time individuals will make life-style changes that divert away from GHG emitting activities further reducing said emissions?
ReplyDeleteThere are a lot of things to like about British Columbia’s carbon tax- its revenue neutrality, its phase in aspect, etc. It serves as a sound example for the United States and the rest of world. Nonetheless, I am skeptical that the U.S. could implement something similar with success. First off, I doubt the current administration would favor redistributing the tax revenue to low-income households via tax credits and broad- based tax cuts. I think we would see even more revenue being targeted to specific corporations over time than we see in BC. Not to mention that such a use of the carbon tax revenue seems entirely counterintuitive to me. Why should the government use the revenues to support the very industries that harm the environment? Moreover, the article stated that one reason the carbon tax was implemented in BC was that there was “intense” voter interest in the issue of climate change at the time. I do not sense that same sentiment among American voters today. Finally, I think conservatives bank on the idea of economic growth stemming from a carbon tax. They use it as a rallying cry to garner support from the right. However, there exists no sound evidence that the carbon tax in BC has significantly increased economic growth.
ReplyDeleteI agree with Laura that this is an interesting and encouraging example of how carbon taxes can be successful, but that it seems unlikely given the current political climate in America. One thing in the paper that concerned me was in the conclusion when it said that there have been deviations from the policy in recent years. For example, there were some tax-exemptions given to some agricultural sectors in 2011, which is in clear opposition to the policy's original goals. This kind of thing is what I would expect to happen in America. With different sectors having so much political influence and relying so heavily on government subsidies, I am not sure how feasible it would be to implement this kind of carbon tax. However, this does not mean I think it shouldn't happen. I think it would be really good for the environment, of course, and it might be good to break down some of the ways the government is being forced to submit to big businesses and industries such as the agricultural sector. It would undoubtedly be a hard thing to do, but sometimes hard things are the right things, and this may apply in this case
DeleteThese are the main points I thought of as I read as well. When they first mentioned the exemptions implemented for certain industries, I was slightly discouraged. Though agriculture and competitive markets are definitely important, pollutants from agricultural practices are also a major issue. I'm not an expert of farm pollutants, so perhaps its not primarily carbon and giving them cuts on carbon wouldn't have as huge of an effect (though the whole reason they needed one was because they were being effected)... I agree with Mary that these are things I would expect to see in America. I feel as though a carbon tax really has to be marketed to the public correctly, just like every tax or perhaps more. I would love to see another analysis on the costs and benefits of the exemptions themselves. In addition, the transition into corporate-targeted tax cuts is interesting to me considering later in the paper, some negative effects on low-income households have been found because their cuts aren't proportionate to the tax itself, so these funds should probably not be focused on the film industry? What are the reasonings behind this; why film? Lastly, it would be important to not focus on economic growth just as a measure of GDP, but again look at the positive economic benefits from climate change because these are included in social benefits and could result in growth despite a loss in GDP.
DeletePrior to reading this study I did not know the ins-and-outs of a Revenue-Neutral Tax. After reading I understand that the only way to get the public on board with a carbon tax is by implementing a Revenue-Neutral Carbon Tax like BC did. I appreciated the purpose of this study in analyzing a wide collection on the effectiveness of the carbon tax in order to grasp its results from a variety of answers. Although study explained how all the results were found, it still left me wondering if there was one study that adjusted for controls better than the others and therefore had the most accurate depiction of the reduction of emissions. Instead this study says that the range of reduction of emissions was between 5%-15% which I feel is a relatively large margin. Given the margin the summary clearly emphasizes that the tax did result in a reduction in carbon emissions. An additional question that this study left me with was in regards to the Revenue-Neutral aspect of the policy. The study clearly proves that the BC government failed to properly support all lower-income families when the tax rose in 2012. I’m interested to know if the government has accounted for these shortcomings and has implemented policy to protect them today as this study was published in 2015.
ReplyDeleteBesides the econometrics results that found no real impact of the tax on the economy (without even including the social benefits from reducing emissions), what I found most interesting about Rivers and Murray’s paper is the analysis on public perception on the tax. I consider this the most important aspect of environmental change. It is clear that policy makers mostly care about having the support of the voters. Most of them likely not pursue a policy that will get them out of office in the next elections. At first, public opinion on BC tax was mainly negative. However, as time passed the opinion changed towards a more favorable one. This is probably because all the fear they had about the economy getting hit because of the tax, but as this did not happen they changed their minds. Hopefully policy makers will consider this moving forward.
ReplyDeleteAdditionally, I think the most encouraging piece of information presented in the paper is in table 5. The public with an age less than 30 had a negative opposition towards BC tax that was almost 20 times bigger in magnitude than the positive opposition of the public with an age above 55. As Prof. Casey said in class, the young population are able to see what the older ones deny, and that is the hope.
I agree with Ezequiel that developing a positive public perception seems to be the most important aspect of persuading policymakers to take action on environmental issues. This article provides evidence that there is clearly a threshold when it comes to public opinion regarding environmental policy. Opposition to environmental remedies such as a carbon tax often relies on claims that the economic shock will be too harmful to overcome. The case of British Columbia shows how the economy and public perception adapt to new policy quickly out of necessity. This paper provides evidence that firms and the general public innovate in order to maintain prosperity under changing conditions. The underestimation of the economy's ability to innovate and respond to changes in regulation is the avoidable hurdle that most environmental policy proposals face.
DeleteI found this paper on BC’s carbon tax very interesting because of how it very clearly stated the successes and failures of the policy and backed it up with clear evidence all while reiterating the fact that it did in fact reduce emissions by 5-15%. Something that I continuously thought about while reading this study was how the results would’ve changed if instead of countering the revenues through the controversial methods of tax cuts and and direct transfers to households, if BC would’ve used the model stated in the paper for Tuesday about paying dividends. The dividends model seems more simple and would’ve avoided issues mentioned such as the disproportional tax cut to the motion picture industry which doesn’t seem to affect that many people. Another thing that stood out was the repeated use of the term “textbook policy” to describe the carbon tax. This seemed odd because as we have learned in this class and other classes such as Micro and Macro theory that textbook version of economic policies usually are not realistic because of how theoretical they are and how they are based on many assumptions. Further more, it was interesting how the paper talked about the deviation from the original textbook policy as a bad thing when I would have thought any sort of adjustment could be seen as helpful considering the original policy was so experimental.
ReplyDeleteCanada's implementation of a carbon tax provides an ideal opportunity for economists to refine their projections of the effects of a carbon tax in the United States. I am curious what the projected decrease in emissions for Canada was prior to the implementation of this policy. Whether the effects were over or underestimated could help indicate firms' true marginal costs of abatement. This information could then be used to help refine projections and choose the most efficient tax level for the U.S.
ReplyDeleteI am also interested in more details about how the revenues are redistributed to corporations through tax cuts. Care would have to be taken where these tax breaks occur. Cuts directed towards carbon emitting firms could distort the effect of the tax. One solution would be to give tax breaks to firms who invested in research and development. However, it seemed that cuts were directed towards seemingly random industries such as the film industry. How are these sectors decided on? Is this simply a form of earmarking for politicians to boost their support or is there some other consideration behind it?
In response to your initial remark J.T., I had similar thoughts as to the estimation of firm’s true abatement costs. More generally, taxes make it difficult to determine an optimal pollution level, while allowing us to find marginal cost at a specific tax level. Figure 1 depicts the revenues from the carbon tax, which illustrates a relationship between increased carbon tax and carbon tax revenues: rising C$5 per year starting at C$10 per ton of carbon in 2008. The tax levels out in 2012-2013 at C$30, but there is still a noticeable positive slope from 2014 to 2018. This may indicate that the optimal level of pollution has not been met at C$30 under the assumption that increased GHG emissions are associated with an increase in carbon tax revenues. If firms are willing to produce more emissions, then the tax level may be too low if the primary goal of the tax is to reduce emissions. If the number of firms in the market is not constant, then new entrants may help explain the increase in carbon tax revenue over time at a constant carbon tax rate. In a world of uncertainty, the effectiveness of cap and trade versus a tax are unknown, but I would expect the carbon tax levels to decrease over time, as markets shift towards more profitable means of energy production with more support from government. How long that shift takes is uncertain, but an eventual decrease in carbon tax revenue may mark the economy’s change to renewable energy products. Overall, the Canada’s implementation of a stand-alone carbon tax can serve as a model in regards to implementation of the program and double-dividend use of tax revenues.
DeleteOne aspect of this article that I found interesting was the third development that to the passage of BC's carbon tax -- the presence of a right-center majority that is both pro-business and pro-environment. As Americans living in 2018, the coupling of business interests with environmental issues is not something we hear very much about. The debate has become so polarized that most people consider business interests and environmental issues to be mutually exclusive, and that we should only focus on one of the two. BC's carbon tax has clearly demonstrated that this is not the case, and that businesses can still thrive while paying taxes on emissions. This takes me back to the piece we read on Tuesday: the arguments and economic rationale behind the "conservative case" are no different than the conventional concepts of carbon taxation, but the authors of that piece framed the concept of a carbon tax in a way that caters to conservative interests. It is measures like this that I hope will lead the left and right to a consensus, but given the current political atmosphere that does not seem likely in the near future.
ReplyDeleteAfter reading the CLC piece, I was very much behind implementing some sort of carbon dividend plan in the U.S., and this study on British Colombia's carbon tax plan only furthers my support. However, I'm going to do my best to try to play devil's advocate in this post. I would have liked to see a little more about the immediate economic shocks that were felt when this carbon tax was first implemented. Specifically, how many jobs were affected/lost and how that impacted citizens and families across wealth distributions. I feel like that is one of the bigger arguments against the tax and all the authors did to really address it was present some theory. I also was not totally clear on the double dividend hypothesis. We have obviously discussed in class about the relational nature between output and the environment, and how improvements in one lead to improvements in the other, but I don' think that is really how they explained it. The explanation they gave: "Because income taxes introduce price distortions that reduce economic output, lowering income taxes through the introduction of a carbon tax can produce a double-dividend effect, wherein the tax not only reduces GHG pollution, but also raises total economic output," didn't totally make sense to me. I am still very much behind the carbon dividend but I would like to see some further research addressing the empirics on the immediate shocks.
ReplyDeleteAs the CLC article presents, a tax based on tons carbon emissions then actually imposed on the products that produce it has tremendous promise and can be an effective tool in reducing GHG and other emissions. Adding the premise of revenue neutrality both increases its political appeal and if I understand it correctly limits dead weight loss. However, I think the redistribution model of that tax revenue can be better thought out and used more effectively. Simply cutting personal or low income taxes will not result in a more carbon efficient world. Yes the overall impact of the tax did end up reducing the amount of carbon emitted, however it did not have an effect on how efficiently carbon can be use. Corporate tax cuts fall largely into the same category. As we are seeing now with the current cut on the corporate tax rate companies are slow to invest in innovation and are much more motivated to use the tax windfall to raise dividends, pay bonuses, or conduct M&A activity. All these activities certainly increase shareholder value but do nothing to increase or directly reduce the amount of the carbon the company will produce in the future. In d future cases of such tax implementation I think it would overall be more effective to subsidize corporate energy efficiency projects or clean energy for personal consumption. Subsidizing clean energy for example would have a tangible impact by lowering personal power bills giving a windfall of cash to families that would feel like a tax cut but also encourage clean energy development at the same time. You could even scale the subsidy on power bills so that small power bills get more relief than large, having more impact on lower-income families as well. Overall I think the plan described in the paper is a fantastic tax plan but the use of its revenues could be better thought out and encourage investment rather than spending.
ReplyDeleteThe BC carbon tax provides economists with much information to determine the success of such a policy. It seem that officials in BC could be more transparent with their data, under 'evidence from economic modeling' section, the text states that the BC government performed an economic analysis, but would not share a more detailed description of their approach or the data they used. Regardless of the success of the policy, this scenario is important to study deeply as it is a unique case without industry exemptions or differing tax rates (in the original implementation).
ReplyDeleteI was also interested in the potential for emissions leakages, which was not studied. I am curious how this concern leads to the discussion concerning a global, or at least national, treaty to really have a substantial effect on emissions, even if a regional policy may be more politically feasible.
What I found surprising about BC's carbon tax is that it initially offered no exemptions for particular sectors when it was first implemented in 2008 but starting in 2012, they granted exemption for the entire agriculture sector. This was due to the concern expressed by farmers that this carbon tax would make them uncompetitive with California and Mexico as well as other countries with more relaxed emission policies who would gain trade advantage and increase production. I believe that BC could have reduced its emissions way beyond 5-15% if it did not grant such exemptions. As we discussed in class, environmental policies can cause the GDP to shrink in the short run: there is a temporary trade-off when it comes to implementing such policies that improve environmental quality. However, just because there is a temporary loss of income does not mean that the society is worse off. When environmental quality improves, workers are healthier and more productive which translates into economic growth in the long run. My point is: even if farmers might think that this carbon tax will severely hurt them, they will eventually find ways to adapt and alter their practices to adjust to it. This will also encourage technological innovation which will end up benefitting not only the agriculture sector, but the society as a whole.
ReplyDeleteThe exemption of gasoline and diesel used in agriculture from the carbon tax, despite findings of “no statistically significant impact of the carbon price on BC agricultural flows” was a section in the article that also stood out to me. I agree with your point that examining the long-term influence of the tax on this sector’s uses of fuel can benefit both farmers and society.
DeleteThe decision to exempt the agricultural sector parallels with several aspects of current U.S policy. The Clean Water Act exempts agricultural runoff from being regulated as a point source of pollution, even though doing so would decrease pollution levels as it is one of the largest contributors to water pollution and can be regulated as a point source by examining input. Farming and ranching practices are also exempt from needing a permit to dredge or fill the land. I think one reason why policy-makers are more reluctant to add regulations or taxes to agricultural practices is because of the severity of potential risks. Although the article stated that agricultural flows would not be significantly affected by a carbon tax, I think there is still speculation that interrupting current policies related to agriculture can have greater risks than those associated with other sectors. There’s the potential for food insecurity, and British Columbia may have to increase their agricultural imports. Citizens may also be wary of supporting a tax that could affect their food supply.
It is evident that British Columbia is not alone in its policy that makes exceptions for agriculture. It can be a tricky area to develop policy on, as food and farming practices are so vital to life, but there are so many differing perspectives on what actions to take. I am curious to see if British Columbia will reverse their decision in exempting the agriculture sector in the future.
British Columbia's tax plan seems to be achieving its desired effects, although Murray and Rivers bring up some important shortcomings. The possibility of an increase in unobserved emissions in response to this tax is worrisome, and I am curious if any studies have since been undertaken to address this concern. I also wonder if the tax is significantly less cost effective with their spending that supports specific industries and their exemptions to certain parts of the agricultural industry. If it is actually less cost effective due to these things, what would be the best way to correct it without hurting the economy too badly? Overall the tax has made a significant impact on emissions while having a relatively low impact on the economy, and in the future it will serve as a basis for other countries and regions if they choose to take a similar approach.
ReplyDeleteI really like the idea of British Columbia's carbon tax, but I just don't see it working in the US. Functionally, yes. Taxing carbon in the US would shift the demand curve to the left, lowering the quantity of carbon emissions. That makes sense. My issue with the tax is how would it get through Congress. If I hadn't read the Conservative's Case for Carbon Taxes first, I would be all for this. Instead, I see little in BC's policy that would incentivize the Republican Congress to implement this into our policies. We need something that will appeal to both party's, like helping the working class. The transparency in BC's plan is something I think both US political parties would like, knowing that carbon emissions are being lowered and knowing where the taxes are going. So while there are aspects of this policy that could be adopted in the US, there need to be changes in it before it is even considered (and yes, I am aware that this wasn't written in hopes of being passed in the US).
ReplyDeleteIt is interesting that BC was the government in North America to follow Solow's advice and implement a comprehensive carbon tax, considering this area of the world is expected to see less damaging results from climate change than other nations. Some estimates say warmer weather could actually help stimulate the Canadian economy. British Columbia's website www2.gov.bc.caoutlines the projected impacts of climate change as extending growing seasons. Instead of fixating on this one potential benefit, BC's website includes the many dangers such as wildfires, shifting infectious diseases and water shortages - a different approach than US government sponsored websites. This idea that climate change could actually benefit agriculture could add to the lack of support from rural Canadians, who originally felt unfairly burdened. This tax structure followed much of the ideas we talked about in class: packaging the tax as revenue-neutral to attract libertarian views and progressively increasing the tax level to help businesses and individuals adjust- beginning at C$10/ton CO2 in 2008 and increasing to $30/ton by 2012. Since the article notes that most of the coal mined in BC is exported and not subject to the tax is the province doing anything to combat the negative effects of coal-mining or disincentivize mining?
ReplyDeleteA common topic of conversation today is the idea of millennial wealth transfers, where over time traditional wealth holders transfer their wealth to younger people who are expected to make more socially accountable business decisions. In my eyes, the carbon tax offers an environmental version of this phenomenon, where as price for carbon-intensive energies increase and therefore demand for substitutes of alternative energy increases. Capital will flow to alternative energy and following basic microeconomic theory, more firms will enter the market, decreasing the price of alternatives. And so while BC's initial aim was to reduce GHG emissions, the tax also encourages alternative energy resources.
Something I found interesting about this tax was all of the emissions that were exempt from the tax. This included fuels exported from BC, fuels used by planes and ships traveling to or from BC, greenhouse operations and fuel used in agriculture, all non-fossil fuel GHG emissions, and fugitive emissions of methane from production and transmission of fossil fuels. I'm surprised that even though these were excluded from the tax they were still able to find a 5 to 15 percent reduction in emissions due to the tax. I think this is illustrative of the idea that taxes can be selective in order to still be business friendly and appealing to more individuals. However, I am curious what effective the tax would have had both on emission reduction and on the economy had these areas not been exempt. For instance, we've discussed what a large carbon footprint air travel leaves. I'm assuming they chose not to tax the fuel on planes traveling into and out of BC so as not to discourage traveling to BC. Would a tax on airplane fuel really have led to a decrease in travel and, in turn, a decrease in plane emissions? I also wonder what helped them to discern which categories to omit from the tax and include in the tax. Are those areas omitted because they more directly impact certain industries?
ReplyDeleteFirst of all, classic Canada, being way ahead of the curve. It's pretty cool that British Columbia has actually implemented the carbon tax and can been looked at to see what actually happens in real life, not just theory, when a carbon tax is introduced. I thought all of the statistics looked really promising. Economic activity/growth is relatively unchanged with a carbon tax, GHG emissions are down 5-15%, and the tax doesn't seem to be regressive on net. What I did find concerning was the fact that the agriculture industry managed to escape the tax and the revenues are now being used to help out certain industries. Since agriculture is a serious contributor to GHG emissions it seems to go against the purpose of the policy for that industry to be exempt. It's also worrying that interest groups have managed to convence the government to give their specific industry those tax breaks. I suppose I could be interpreting that incorrectly; however, and it's the government choosing specific industries purposely to give a tax advantage to in order to encourage that industry's development, but if that's the case it would mean the government is causing distortions in the market, which could bring with it some other problems. The agriculture exception is more aggravating however, since the authors found that the carbon tax didn't even have an impact on B.C.s agricultural flows. All in all the tax seems to work just like economists thought it would! Now if only the old white men with leave office so some changes can be made.
ReplyDeleteI enjoyed reading this article because it provides some positive encouragement on a subject typically shrouded in doubt and controversy. I think a critical piece of British Columbia's carbon tax is the fact that it is revenue-neutral. If we, as Americans, were to consider implementing our own carbon tax, I doubt it would pass in our current political atmosphere if there were no corresponding tax cuts for businesses and individuals. Many people do not understand or are not willing to accept that environmental quality and economic production are not mutually exclusive. I think many Americans, especially the conservative, have a difficult time accepting the notion of yet another tax, but the aspect of BC's tax that provides cuts in other various taxes is likely a little more palatable to the vast American population. Once a tax like this is passed in the US, I would not be surprised if we see results similar to those in BC concerning GHG emissions, and public perception. Once the carbon tax has been in use for several years, people will likely begin to observe the positive effects it has on emissions and air quality and become more in favor of the tax and probably of other similar incentive structures related to environmental and natural resource protection as well.
ReplyDeleteI thought this article was very inspiring and hopefully the US can do the same at some point. It’s great to have a real-life example to show how this carbon tax works and the benefits along with it. I thought it was interesting that this tax was revenue-neutral and that the tax would be sent back to British Columbia companies and households. For me, it is a little unnerving that corporations will get a bigger pay cut sent back to them in the form of corporate income tax cuts, yet they can also transfer off costs to their consumers so that consumers have to internalize the cost of emissions. I can also see that the tax goes up from $10/ton to $30 for CO2, so it becomes even more expensive for not innovating in the corporate environment. These numbers alone incentivize because they could be nervous for future taxes. I also had a question, why is fuel used in agriculture not included? In the 2014 budget, government announced that gasoline and diesel used for agriculture would be exempt from the carbon tax. The answer is not clear to me and would love hear some explanation.
ReplyDeleteI was pleasantly surprised by this article. To start, a policy was introduced and actually worked, resulting in a 5-15% decrease in GHG emissions in BC. Secondly, the policy was meant to be revenue neutral and actually stayed relatively close to this target. Where things got slightly hairy were on two points: 1) The division of tax benefits among low-income hhs, med/high income hhs, and corporations & 2) The subtle allowing of certain business types to be exempted. Congress is so divided at this point that it likely would get bogged down in the details of where the taxes would end up and also would allow lobbying interests to color the feasibility (if any) of which corporations are exempted from the rules.
ReplyDeleteIf there is one type of policy that members of Congress should be able to agree on, it is environmental policy. Both sides will likely hem and haw, but the opportunity to reduce GHG emissions in such a way that benefits both the climate and lowers taxes on the populace as a whole is hard to pass up. I'll add that it is likely nearly impossible to measure the economic effects of having a better climate - I'm inclined to say that cleaner air should result in better general health, better productivity, and happier people. These positive effects seems foolish to pass up and would greatly benefit GDP.
I’ve noticed before that economists often discuss policy implications without considering the political feasibility of suggested policies and that when they do, voter opinion is left out of the conversation. I appreciated, then, that the paper’s authors gave a good deal of attention to the public perception of BC’s carbon emission tax. It’s easy to look at a successful policy from another country and attribute it to voter predisposition, to say “that could never pass here.” To that argument, I would point to the evidence the paper presents on public opinion of the tax, which has unambiguously improved over time.
ReplyDeleteI wasn’t familiar with revenue-neutral taxes before completing this reading and am still a bit skeptical of their intent. Yes, they seem politically feasible, but do they offer any other benefit to society? Also, does it make sense to slap the “Carbon Tax Rebate” label on such a wide array of public and private policies (e.g., credits to corporations, reductions for the film industry)?
After reading this article, I found myself considering many of the same things as Bailey. First, prior to this reading I was not familiar with the concept of a revenue-neutral tax. On the basic level, it appears logically sound and seem to have garnered some positive results once implemented. However, I became increasingly skeptical as to how the redistribution process takes place. With something with as hefty of revenues as this tax would bring in, I could see the allocation of funds to become a major place of debate between political parties. And with anything extremely polarized between parties, it could, in a worse case scenario, lead to counter-productive or wasteful allocation where the original intent of the tax is lost.
DeleteBecause the BC carbon tax is the first carbon tax in North America, it provides a great example of implementing theory to policy. The paper states that economists have long established that a carbon tax is the solution to mitigating carbon emissions and fighting climate change. While the carbon tax is a great framework on paper, I was interested to see how it performed in the real world. It seems there are several major issues with the tax currently in place. I believe gaining public support will pose as the most challenging aspect if America wishes to implement the same tax. First, a clear correlation between the carbon tax and a reduction in emissions needs to be confirmed. While the paper confidently states that fuel consumption and GHG emissions are reduced by 5-15%, the paper also mentions that emissions “leakage” is possible. So if BC emissions are decreasing, but emissions increase somewhere else as a result, there is ultimately no net decrease in emissions. Second, plans such as revenue neutrality and double dividends attract a wider audience. If successful, the tax would not only appeal to environmentalists but also appeal to the working class and business owners. But if the aspects fail to uphold, I see no possibility of the carbon tax gaining support in America.
ReplyDeleteI appreciated the insight this article brought to the conversation about the effectiveness of a carbon tax. As our reading on Tuesday indicated, and this reading elaborated, old, white men in rural communities (the base of the Republican base for the US) oppose any sort of carbon tax. However, as the authors note, “public concerns about the negative economic impact of carbon taxes are cast against a number of economic studies suggesting that modest carbon taxes are unlikely to cause significant negative impacts and in some cases may have a positive effect on economic output.” I appreciated the authors’ acknowledgement that the average person may oppose the tax without any evidential basis, but the authors don’t address any of the potential reasons these groups oppose the tax. The resistance by some demographic groups flies in the face of the data provided by the authors, and, as they note, the rise in opposition rises smoothly with decrease in income. The data show that the adverse effect of the tax on economic productivity is minimal, but advocates of the tax will not be able to overcome the “carbon mythology” that exists in many parts of the US until they figure out a way to translate econometric robustness and double-dividend methodology to something that the average American can understand.
ReplyDeleteIt was interesting to see that one of the factors that made this carbon tax possible was a “right center majority government” that could “push an environmental agenda further than a government considered hostile to business interests.” It seems that as long carbon taxes don’t stand as a threat to businesses in BC, firms were happy to cut their emissions. I was also interested in the manner in which the revenues from the carbon tax were redistributed. While the initial plan was to split the revenues between business and low-income households, the report states that the tax cuts actually outweigh the revenue from the carbon tax. Businesses are getting a larger share of the tax cuts than the low-income households. Furthermore, tax cuts have actually been strategically implemented to promote growth in certain industries. I think this report really illustrates the power that polluting firms hold when it comes to implementation of carbon taxes. I’m reminded of the huge coal mining firms that we talked about in class, and how they have such a large influence in DC. While its comforting to see that firms in BC were willing to compromise and accept tax breaks in exchange for cutting their emissions, I think it would be interesting to see if firms in America as a whole would be willing to do the same. I can’t help but think that some firms like the MTR firms we discussed can’t afford to change their practices, and would be unwilling to adapt.
ReplyDeleteFor my response I am going to compare the “social, political, and economic forces” in British Columbia – that the authors suggest allowed for the passage and continuation of the carbon tax legislation – with those of the United States. (1) Unlike in British Columbia, the United States does not have a robust hydropower source for electricity generation. The U.S. Energy Information Administration’s most recent report on energy, broken into respective sources, indicates that hydro accounts for only 7.5% of total electricity generation. (2) Although the authors make no quantitative statements about the degree of voter interest in climate change, it might not be such a stretch to say that U.S. public opinion is roughly in line. The Climate Leadership Council’s Conservative Case for Carbon Dividends reports that more than two-thirds of Americans are in favor of a carbon tax coupled with dividends. (3) Similar to the article’s findings on British Columbian politics, in the U.S. there is also a right of center majority with strong business ties. (4) President Donald Trump certainly does not have the same enthusiasm for climate policy as did then British Columbia Premier, Gordon Campbell. (5) We do not share the same political institutional structure as British Columbia, which works similarly to a parliamentary system. The report was honestly very encouraging; virtually all signals indicate that the policy is doing what it was intended to, with only minor deviations and no conclusive (net) externalities. Hopefully more efforts like this will come to fruition elsewhere.
ReplyDelete