Cleantech Market Intelligence
U.S. Bucks the Tide on Carbon Taxes
Concerns about rising carbon emissions on a global basis have prompted many nations to implement taxes on their carbon-emitting industries. According to a Climate Commission report, in 2013 33 nations and 18 sub-national jurisdictions will have adopted some form of national carbon tax that covers around 850 million people, about 30% of the global economy and 20% of global emissions.
Although the European Commission proposed a carbon tax in 2010 to charge companies between $5 and $39 per metric ton of CO2, that legislation has not yet been agreed upon by its 27 member states. However, many European countries have enacted their own carbon tax, including Denmark, Finland, Ireland, the Netherlands, Norway, Slovenia, Sweden, Switzerland, and the United Kingdom.
Finland was one of the first countries to introduce a carbon tax, in 1990 (with a 2010 price on carbon of $26 per metric ton of CO2). Sweden and Norway enacted carbon taxes a year later, followed by Denmark in 2002. Today, Norway, the 8th-largest oil exporter in the world, has one of the most aggressive carbon taxes in the world. The Norwegian government has recently proposed to double its carbon tax on offshore oil companies to more than $71 per ton of CO2 and to almost $9 per ton of CO2 on its fishing industry. In the United Kingdom many large companies pay a price for the carbon they emit through the EU’s emissions trading scheme. Examples of carbon tax adopting nations in Asia Pacific are Australia, India, South Korea, Japan and China, which has run pilot emissions trading schemes in a number of provinces and cities to eventually implement a carbon tax on high energy-consuming companies.
What about the United States? The United States has resisted a nationwide carbon tax policy. Indeed, the current U.S. Congress has made every effort to prevent any action to curb carbon emissions by the Environmental Protection Agency (EPA). Most recently, on September 21, the U.S. House of Representatives voted in favor of Stop the War on Coal Act (H.R. 3409) to prevent greenhouse gas (GHG) reduction measures, including a ban on any action by the EPA to address climate change. Given this political climate, a nationwide carbon tax is not very likely in the foreseeable future. However, California has taken matters in its own hands by enacting its own carbon trading scheme, including a carbon tax, as part of its Global Warming Solutions Act, enacted in 2006. To meet the state’s carbon emissions reduction goal of matching 1990 levels by 2020, California developed a cap-and-trade program that included a carbon tax on 300 companies, including several utilities, deemed to be the most serious polluters. Today, California’s cap-and-trade program is linked to Québec’s cap-and-trad scheme, with the first auction scheduled for November 14, 2012.
To be sure, carbon taxes are not without serious challenges and criticisms. Critics object that such taxes will inevitably be passed onto consumers, could result in industry and electricity production moving to other countries, and won’t significantly reduce carbon emissions. Yet, countries around the world, convinced that emission trading schemes coupled with carbon taxes are the most cost-effective and efficient ways of reducing emissions, are taking steps to tackle climate change by pricing carbon. At the same time, policymakers in these countries realize that taxes alone are not enough: broader environmental policies on a national level need to be in place to reduce carbon emissions.