Tag Archives: carbon tax

British Columbia has an effective and politically popular carbon tax

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In October 2013 the Los Angeles Times announced that the climate change debate was over and they will no longer be publishing letters from climate deniers. Great news.

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We live in a convenient spot for family travellers so have had a lot of visitors. Between visitors I have been thinking and reading on the politics of climate change. I noticed that since I started on twitter I have gradually become more and more interested in the topic. The typhoon in the Philippines this year made us all sit up and refocus our efforts to ensure there is a liveable planet for our descendants.

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We live in New Zealand and have watched Australian politics closely. It is been blindingly obvious that a carbon tax can be a recipe for animosity and political suicide both within and between parties. But the bitterness and vindictiveness can all be avoided.

So I was very excited when I read about what had happened over the last five years in British Columbia. They have had a carbon tax since July 2008, starting at the rate of $10 a tonne and increasing every year till this year it was $30 a tonne. In contrast to Australia, the carbon tax has been remarkably successful, both from the point of view of reducing emissions and keeping the economy healthy. Strangely enough it has also kept the government in power.

Why is this? Because they have wisely made it revenue neutral. The Minister of Revenue is obliged by law to look at the tax take from carbon tax and reduce other taxes by at least as much. So it isn’t a tax grab. It is a tax shift away from taxing things you want to encourage such as work, to taxing things you want to discourage such as pollution.

Energy policy activist Charles Komanoff in 2007 co-founded the Carbon Tax Center, website http://carbontax.org. On it Komanoff has written a summary of carbon taxes in various countries and starts with British Columbia. Komanoff believes that support for a carbon tax is growing steadily among public officials, economists, scientists, policy experts, business, religious, environmental leaders and ordinary citizens.

Komanoff is an advocate of revenue neutral carbon taxes. The state does not gain tax revenue from it. James Hansen, an American adjunct professor in the Department of Earth and Environmental Sciences at Columbia University and author of The Storms of My Grandchildren also recommends a fee and dividend system where all the carbon taxes collected are returned to the people.

But what is the best method of distributing the carbon tax money to citizens? I think it is the one used by Alaska which has the Alaska Permanent Fund which pays a yearly dividend to all residents who have lived there more than a year. This system is the closest thing to a basic income guarantee that exists in the world today. It is a small, yearly dividend, financed indirectly from oil revenues, paid by the state government to every citizen who lives in Alaska — including all children.

British Columbia has implemented a carbon tax which is revenue neutral, but they would have been better to use the Alaskan method of fair distribution. We can learn from both, and bring the best of each together.

What astonishes me most about the British Columbia carbon tax is the politics. Five years ago it was implemented in 2008 by the the BC Liberal Party, the party further to the right with the most free market policies. The left leaning BC New Democratic Party wanted to repeal the carbon tax but the BC Liberal Party was re-elected in 2009 and then again in 2013. Income taxes are now down to 10% and the drop in fossil fuel use over the five years has been 17% per capita.

A carbon tax makes sense whether you are a conservative or a conservationist, Labour or National, a climate skeptic or a believer. Right and left must unite on this vital issue as the biosphere is no respecter of political views. As academic Guy McPherson says “Nature Bats Last”. It is time the left leaning parties started to understand that tax shifts are not only politically popular but essential if we are to curb climate change. Adam Smith’s invisible hand works well when people are handed a dividend. On the whole the people will spend it wisely.

Why Climate Change is such a Difficult Political Issue

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TOPSHOTS-PHILIPPINES-WEATHER-TYPHOONIt has finally struck me, albeit in the middle of the night. I have been pondering why, in the face of all the evidence and despite a growing willingness on the part of all nations to address the issue, efforts to reverse climate change are so insipid. Climate change is still in the too-hard basket. Conference after annual conference never fails to disappoint us and Warsaw 2013 wasn’t much different. A Guardian commentator called Warsaw “more like a shuffling of feet”.

OK what is this Road to Damascus discovery? It is to do with affordability. We are trying to add an extra tax, a carbon tax in a context of deflation, where the affordability of everything is declining. Prices are going up relative to disposable income. We are losing our purchasing power (well apart from the 1% I suppose). So it is no surprise the climate change issue is too hard for politicians. Given the choice of putting up petrol and electricity costs when their constituents are already suffering, politicians will kick for touch and argue they need a ‘balance’. Disappointment is inevitable.

Well then how do you solve this political problem? The answer is by addressing the affordability issue head on.

So let’s look at what is reducing the purchasing power of people on this planet? Why, it is the same old two culprits – the bank issued money system and the illogical tax system.

What do I mean? Well if money is issued as interest bearing debt, then interest is built into the price of all goods. How? Every car comes out of a factory whose owners borrowed money at interest from banks. Every piece of furniture, clothing and kitchen goods is manufactured where the owner borrowed money from a bank at interest to do so. Every potato, every steak, every drop of milk and every orange came from a farm whose owners were mired in debt to a bank. The cost of the bank interest is built into the price of all goods. So if we issue money without debt the price of goods relative to wages will drop. Purchasing power will increase. Affordability will improve.

Then there is the incredibly silly tax system. When we tax labour, every manufacturer or primary industry producer has to build the tax in to the price of their goods. Take off income tax and your purchasing power increases. It is the same as GST and company tax and a range of other illogical taxes.

So part of the price of all primary produce and manufactured good is the burdensome tax and the totally unnecessary interest charged when issuing money. Solve those two problems and our purchasing power rises.

Our solution of having a parallel national currency spent into existence without interest and unburdened by these deadweight taxes will dramatically give more purchasing power. Affordability will improve. See this slideshow or read this site for more on this.

So when we change the tax system away from taxing labour and sales and towards charging rents on the right to use the commons, including the biosphere, it will be politically more possible to do something significant about climate change. After all, in proposing a carbon tax, climate change activists are only asking for a regular rental on the right to use the biosphere to get rid of their greenhouse gases.

If a currency flows freely through the economy and only meets opposition when it comes up against the constraints of the commons, it will stimulate innovation in producing and manufacturing clean liquid fuels and give impetus to the whole post fossil fuel economy. The term “green growth” will transform from rhetoric to reality and innovation will thrive.

Resource rentals

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b)             Resource Rentals
Untaxing the productive economy creates wealth while taxing nature conserves the planet. We would tax the use of land, metals, oil, electromagnetic waves, water, agricultural quotas, and any resource which is part of the commons. The principle is that we pay for what we hold or take, but not what we do or make (unless we make them using precious resources or the product is environmentally or socially harmful.)

All private companies which sell basic natural resources will pay an annual rental to the public purse.

If hydro electric power stations currently owned by Government were sold to private owners, then the new owners would have to pay a water tax for our public revenue.

Water tax. The worldwide demand for water is predicted to increase steeply and we have no reason to believe New Zealand will be an exception to this trend.

The irrigation tax proposed by the Greens is a good example of a resource tax. It is a tax on the use of a scarce common resource, water for personal gain. If farmers were taxed according to the resources they used, then water intensive farming would not be as profitable as dry farming. Dairy farms would give way to sheep and beef farms and horticulture, thus reversing the trend to dried up and polluted rivers. It would also mean overseas owned utilities and monoculture agribusiness would start to pay their fair share of tax.

Likewise a resource tax on scarce resources like oil would include petroleum based fertilisers and pesticides. This  would hasten the move to organics. Another effect would be to minimise taxes for sustainable farming and consumers with a low carbon footprint. Changing to resource taxes would simplify the tax system.

China has of late moved towards a rare earth tax and has adjusted its coal taxes upwards. Australia is proposing a tax on mining.