It is now the eleventh hour for the human race. Vast swathes of the Earth have begun to burn due to man-made climate change, from the forests of California to the Australian bush. The IPCC states that global warming must be limited to 1.5 degrees Celsius. This will require a difficult transition from fossil fuels, which are responsible for 10% of world trade and global investment. Renewable sources must supply 70-85% of electricity by 2050 for this goal to be met. What should be done?
A carbon tax is the best way for governments around the world to mitigate the problems we face. It forces businesses to pay the government for each ton of CO2 produced, radically changing the incentives present when individuals and companies make decisions on a daily basis. Not only would such a policy internalize the externality resulting from greenhouse emissions, but it drives actors to make more environmentally friendly decisions, such as purchasing an electric car. In the long term, it encourages the development and proliferation of alternatives by decreasing their relative costs for consumers and producers whilst increasing the costs of inaction.
By placing the onus on market actors to find solutions, we harness the vast resources and generally greater efficiency of the private sector. This is by far the best option available to policymakers and regulators. The alternative involves complex mandates and subsidies, drawn up individually on an ad hoc basis, disproportionately benefiting politically connected groups and burdening business with compliance. These measures, designed by an often unelected, overburdened bureaucracy, take years to finalize and implement, with myriad potential loopholes. A carbon tax is easier to devise and enforce in comparison, especially on an international scale and in countries with corrupt or inept governments. It is easily adjustable to give more leeway to industrializing nations but at the same time nudge them away from fossil fuels.
Importantly, it is difficult for an electorate to engage with what seems to them to be a set of vague, convoluted, technical regulations. The carbon tax is something concrete and highly intuitive in its workings: something any concerned voter in any democracy can get behind.
Is a carbon tax a completely comprehensive solution on its own? Probably not. However, it is unique in that it generates vast revenues, which can either be directly re-invested into the economy or directed towards reducing the emissions of public services. Climate change mitigation-oriented foreign aid would be massively useful as we allow developing countries to take the first step away from basic technologies, such as the widespread use of wood for fuel, which are by far the most inefficient and damaging of the various carbon-emitting processes.
The carbon tax shifts the burden of mitigating the effects of climate change onto those whose choices result in the most harm, with very manageable economic side-effects compared to the other options on the table. It’s time that polluters began to pay the costs for the damage they inflict on human society and the natural world.