Carbon Tax

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One way of changing the behavior of humans is by forcing changes in the price of things. If you have access to the same thing at two different prices, you probably will opt for the cheaper one. Adding tariffs is a way in which countries can push consumers towards local products instead of imported ones 1 .

Many economists propose that adding a tax to carbon emissions would therefore offset the costs of going towards greener energy sources. Consumers will be incentivized to purchase 'green products' because they would be cheaper. There could even be a market of carbon allotments, what is known as cap and trade 2 .

This purely economic view still misses the fact that technologically speaking the world is not ready for an energy transition . Sure, companies will have the means to plant trees, but the underlying problems are going to still be there.

Another problem is how to regulate it if you don't do it at a global scale. If a country implements a carbon tax , producers will just move to were it is cheaper. This is exactly the situation with eastern countries in which labor costs are lower, and pollution regulations scarcer.

One can think of a country adding tariffs to imports based on their carbon impact. But this can be done only by large enough players that don't care about losing competitiveness. Import/Export and consumers play a delicate balance in the world economies.

Tags: #climate-change #economics #climate-and-economics




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Aquiles Carattino
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