The Realities of a Carbon Tax

As we become more educated and focused on sustainability in economic practices, we tend to seek out one or two simple solutions that would be able to preside over what are very complex problems.  If we are to reach a point of peak regenerative economics, industrial entities must act in ways that not only preserve their resources, but also actively repopulate them.  The primary resource being the Earth itself, whether or not companies directly rely on it for their products.  A large problem currently facing the majority of the industrialized world is that of pollution resulting from the industrial process.  One solution that has been proposed is a carbon tax that would command that companies are taxed relative to their pollution rates.  The idea being that this tax would force companies to sharpen their policies on pollution and reduce it in an effort to benefit them economically.  Simply, apply a new standard to the market and the market will control itself.

In theory a carbon tax is a great idea and one that could certainly make at the very least a respectable impact on the problem of pollution in economic practices.  However, it is important to take into account all aspects of a carbon tax and how these aspects transfer to reality in order to reach the determination that it is not a catch-all solution. 

First: Those most entrenched in working towards desired levels of sustainability often thoroughly endorse government control and regulation.  A carbon tax may seem like the perfect marriage between conservative and liberal ideologies (appealing to the left by reducing pollution and to the right by limiting government interference in the market), but in reality a simple carbon tax would likely not be effective enough to move the needle substantially in the direction of desired levels of sustainability.  The belief that the market will be able to sort out pollution problems through different structure tweaks by itself grows less and less likely by the day.

Second: Say we apply a carbon tax to the market and it makes a significant impact in the field of reducing carbon pollution. Great. Now what about the litany of other pollution problems that face the industrialized world?  There are numerous sectors of the market that deal with their own specific pollution problems and require their own specific pollution solutions.  “Believing a single tool will accomplish everything requires seeing the economy as a frictionless machine, a spreadsheet, not what it is: a path-dependent accretion of past decisions and sunk costs, to be tweaked and unwound (Putting a price on carbon is a fine idea. It’s not the end-all be-all).”

Third: Let’s return to the previous scenario wherein we apply a carbon tax and it makes a positive impact.  Is this a victory for proponents of sustainability?  Yes.  But instead of it being the single victory we’ve been waiting for to wash away all of our pollution problems, it’s more like a tiny grain of sand on a vast shoreline.  Think of it this way; we need to win enough games to make the playoffs.  Then we need to win the series of rounds one and two.  Then we need to win our conference championship.  Then we need to win the World Series.  If a carbon tax is effective it’s akin to us hitting a double in the first game of the season.  This is the gap between the improvements a carbon tax could make and the improvements that we have to make.  The goal is to reduce carbon emissions to as close to zero as we can, as fast as we can.  We must transition to a new foundation of industry that constantly works towards the interests of the market and sustainability within it.  Condensing that idea into a single sentence and typing it was work, now think about actually implementing everything that goes with the idea it presents.

A carbon tax is certainly a positive idea and possibly one that can make some modicum of change.  The takeaway here is that it will take many, many positive ideas enacted to make the change necessary in a way that benefits all parties involved.  Be enthusiastic about the cause, but refrain from pouring your entire belief system into one idea that presents itself as a solution to one-hundred problems.

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