Home » To counter the climate crisis, the carbon tax is immediately needed – Tim Harford

To counter the climate crisis, the carbon tax is immediately needed – Tim Harford

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03 November 2021 14:59

A friend recently wrote to me about an ethical issue. He was planning a distant trip to visit his family, but he knew very well that the flight would have a strong environmental impact. How could he make his move justifiable?

I suggested that he find out what his carbon footprint would be (a ton of CO2, apparently) and then figure out a hypothetical tax on emissions. Would he still be willing to travel if he had to pay for it? If not, the trip wasn’t worth it. My advice raises the question of what this carbon tax should be (carbon tax).

With an emissions tax of five pounds (around six euros) per tonne of CO2 – many of the global greenhouse gas emissions are taxed less than that – the additional tax on that tonne for the return flight would be negligible. With a more substantial increase, £ 50, the tax would be substantial but perhaps not decisive (the emissions trading system in the EU and the UK, until recently, provided for around £ 50 per tonne of CO2. Price in the UK has risen a lot, and in the US the Democrats are working out their own version of the carbon tax).

Difficult questions
If the carbon tax went up to £ 500 per tonne of CO2, my friend would be forced to stay away from his family longer than most of us usually do. I realize that it is quixotic to advise people to make personal consumption decisions based on a completely hypothetical tax, but it does get to the heart of the matter. The tax is not only an incentive to change behavior, it also tells us which behavior we need to change most urgently, information that is almost unattainable today. Global supply chains are extraordinarily complex, delivering products that have an ecological footprint that is difficult for consumers to quantify.

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The big picture is pretty clear: flying is a bad thing, cycling is better than driving, double glazing is a good idea. But is it better to buy British tomatoes, perhaps grown in heated greenhouses, or the Spanish variety, which runs more kilometers? Even for the most observant, these are difficult questions.

The price of everything we buy is linked to the cost of the resources needed to produce and deliver it

About a decade ago Mike Berners-Lee published How bad are bananas? (How Bad Do Bananas Do?), A book that explained the environmental impact of various everyday products (bananas aren’t actually that bad). The title alludes to the fact that it is a desperate undertaking to wait for consumers to voluntarily defeat climate change. How bad is red wine for the climate? And a smartphone? We all make billions of decisions every day about what to buy, how to travel, and at what temperature to set the thermostat. We cannot decide every time by reading Berners-Lee’s book, and an emissions tax would be effective precisely because it would not make it necessary. The price of everything we buy is linked to the cost of the resources needed to produce and deliver it.

Cloudy and real bond
If a product requires half a hectare of land, tons of raw material, megawatt hours of energy and several days of skilled work, you can be sure it won’t be cheap. The link between price and cost is nebulous but real. Yet the burden of greenhouse gas emissions is not reflected in that cost. An emissions tax changes this by making the impact on the climate a real cost like any other. It sends a signal to all production chains, prompting them to choose the least polluting alternative.

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Maybe some consumers will decide that the cost of a T-shirt that includes the tax on emissions is too expensive, but in the meantime the textile plant will try to save electricity, and the electricity supplier will switch to solar energy. Each segment of the value chain will become greener.

Decarbonising the world economy may seem like a titanic effort, but it may seem more achievable if we think of it as an infinity of small steps

Big changes could be achievable with a surprisingly light carbon tax. The International Monetary Fund has suggested that a $ 75 (€ 64.5) per tonne of CO2 may be needed. But even with one hundred pounds (118 euros) a ton – about double – the impact on daily life could be less than most people would expect.

In the UK, annual per capita CO2 emissions are less than six tonnes, plus two or three tonnes reflecting the environmental impact of imported goods. A one hundred pounds per ton tax covering those emissions would increase the cost of living by just two pounds (€ 2.36) per day, and would cover more than 5 per cent of UK tax revenue. This is no small thing: the government would do well to send each citizen a small sum as compensation.

The weight of the measure shouldn’t be distributed evenly: anyone who spent a lot, flew a lot, drove a lot or heated large, drafty homes would pay more. And you probably wouldn’t notice any difference in the price of bananas.

Coffee offers a shining example of how this change would be largely unnoticeable. According to Mark Maslin and Carmen Nab of University College London, a kilo of coffee beans delivered to the UK generally has an environmental impact of around 15 kilos of CO2. If grown and shipped more sustainably, the impact is 3.5 pounds. A hundred pounds per tonne emissions tax would therefore be £ 1.50, or 35 cents in the latter case. Dozens of coffees can be made with a kilo of beans: coffee drinkers may not notice, but you can be sure that producers and shipping workers will try to push their costs more towards 35 cents than towards 1.50 pounds.

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My colleagues Gillian Tett and Simon Kuper have written about the risks of greenflation (green inflation) and the difficulties that a serious tax on emissions would cause. They do well to worry about the political damage that would result from a poorly designed tax. But don’t panic. Decarbonising the world economy may seem like a titanic effort, but it may seem more achievable if we think of it as an infinity of small steps.

From thrift shopping to more efficient logistics to renewable electricity sources, CO2 emissions taxes gently guide us towards ever-greener solutions, no matter whether we’re guilt-ridden or cheerfully disinterested. This is why they should be at the heart of our fight against climate change.

(Translation by Federico Ferrone)

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