Sunday, January 11, 2009

8 Reasons Why Big Business Prefers a Carbon Tax

I think BigCityLib asked an interesting question in this post: Exxon Supports A Carbon Tax Because...
But, given our last federal election result, is one still a viable policy option in Canada, or are we stuck with some version of C&T merely because it has the advantage being, in effect, a hidden tax, and thereby palatable to our bovine electorate?
I would have to answer yes to this question, but for the bovine electorate. I don't find that part particularly offensive, I expect its just the passion this topic brings out in people. I left a long comment over there, the comments are interesting reading. So I'm expanding that comment into a post.

So here's my list of why big business prefers a carbon tax over cap & trade (C&T):

1. Raise public discussion to confuse and delay action. As long as the battle is still active, you haven't yet lost.

2. It strengthens the position in the voters minds and gives talking points to right-wing pundits.

3. Carbon taxation is friendlier to business and the economy than C&T, especially if that tax is very small or negligible. "See: we're doing something! Look at the millions of tax dollars! How can you say it isn't enough." A carbon tax with real teeth would bring in a lot of revenue, not a few million dollars.

4. They can argue for a carbon tax to be revenue neutral there must be corresponding decrease in corporate taxes to offset the carbon tax. And by corresponding I mean much, much greater than resulting in a net drop in corporate tax revenue.

5. There are no limits to the price of carbon in C&T - it is determined by the market. You could easily imagine "bubbles" and speculation driving carbon prices to insane levels. Carbon competition is another competitive threat to a corporation. This is why I favour a carbon tax - it is much easier to predict and control the economic effects, where C&T controls the pollution and lets the price float as per the market. Big business wants a system that won't burn them like fluctuating energy prices have.

6. As BigCityLib points out, a carbon tax is more visible to consumers (voters). C&T costs get bundled into prices, and consumers would blame the companies for higher prices. But they'd blame a carbon tax on the government (and hey, what is the government wasting this new tax grab on, anyway?).

7. There are no limits on pollution with a carbon tax. Business is under less pressure to "green up". Hey, that tax isn't their problem, it's the governments'.

8. Someone has to perform the trading, which drives up administration costs compared to another tax.

While those reasons suggest C&T may be superior, I still prefer carbon tax. I'm disappointed with the last federal election and I expect a federal Canadian carbon tax is mostly dead, especially if Obama goes with C&T.

But doing either a carbon tax or C&T is better than nothing - unless the tax and caps are close to nothing. David Gow at The Guardian writes that carbon trading isn't working in the EU. It seems too many carbon credits were issued by governments and the resulting price of carbon was just 1 Euro/tonne.

In short, my position FOR carbon tax over C&T is that we've seen a lot of market volatility latey in everything: equities, bonds, currencies, interest rates, commodities. Why introduce another artificial, arbitrary market which could be just as volatile? Probably more voltile, IMHO.

I'll be watching the B.C. provincial election to see how their carbon tax fares. Mostly dead is also slightly alive.

When I get time, I'll try to make a list of why C&T is better than a carbon tax (like real limits to poloution, maybe). Unless someone beats me to it... any takers?

1 comment:

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