Is it Time for a Carbon Tax?

By Alan Grotheer

carbon taxLast week, CDP (formerly the Climate Disclosure Project) raised some hopes among conservationists by issuing a report showing that a large number of corporations are incorporating provisions for a carbon tax in their long range financial plans. Citing data received directly from the companies in response to a survey, the report indicates a tacit, if not explicit acknowledgement of the scientific consensus regarding the causes and potential threats of climate change, well in advance of any comprehensive international agreements or significant actions by most of the largest greenhouse gas emitting countries.

By including carbon tax expenditures in their projections, the companies' decisions reflect both a realistic approach to risk management and a desire to gain competitive advantage over corporate rivals who may be underestimating the financial implications of a carbon tax. Though according to CDP the specifics of a carbon allowance calculation vary greatly from company to company, most financial plans do one or more of the following:

• Incorporate existing carbon taxes where they have been enacted, such as in the EU.
• Anticipate taxes in advance of adoption for long-term planning.
• Build flexibility in their carbon tax estimates so that adjustments can be made if and when new taxes are enacted.
For companies who disclosed actual prices that are being incorporated into their calculations, prices ranged from $5 to $60 per ton of carbon dioxide. The higher price estimates, most of which came from the five major oil companies, were generally applied to projects ten or more years in the future, reflecting a realistic assessment of the current state of inaction among most developed countries.
In the United States, for example, a carbon tax is nowhere in sight. Aside from the "Climate Protection Act of 2013", which was introduced by Rep. Bernie Sanders and Sen. Barbara Boxer this year and places an initial tax of $20 on a ton of CO2 with a 5.6% annual increase for the next 12 years, there is no appetite for a carbon tax in either house of Congress or the Obama Administration.
But the willingness of multinational corporations to allow for ongoing and potentially increasing taxes on their emissions while preserving their bottom lines presents an opportunity for activists, politicians, and media outlets that support climate change legislation. By invoking the non-partisan Congressional Budget Office's analyses of the social cost of carbon and the potential windfall that this tax could provide to the government and the U.S. economy along with the CDP report, proponents of the tax could well begin to build public support for Sanders-Boxer or some variation thereof.
A February 2013 poll by the Nicholas Institute of Duke University showed that a mere 29% of Americans support a carbon tax, indicating that there is a long road ahead. To raise that number sufficiently to change the priorities of Congress will require a focused and sustained campaign to raise awareness of the facts about greenhouse gases, climate change, and the real economic costs of both action and inaction. The IPCC, UNEP, and climate scientists around the world tell us that we can't afford to delay our efforts to reduce greenhouse gas emissions. By telling us that corporations are preparing for a carbon tax, CDP has opened the door for a new round of discussion of the benefits, if not the urgency, of a tax on carbon.

 

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