There has been something of a discussion about carbon taxes at Catallaxy which started out pretty constructive however it seems to have turned somewhat feral and I’ve called it a day because wading through the abusive mud comments to find the gem comments is too much like hard work. Instead I’ve been doing some digging on Google and I found a few things that surprised me.
Firstly there is this news that British Columbia has just implemented a carbon tax in their latest budget with the revenue being used to reduce personal income tax and company tax.
That, at least, is how the provincial Canadian government has designed the tax, which will rise incrementally until 2012. It starts at about 9 cents per gallon of gas, and ending at about 27 cents.
But the $1.85 billion annual tax is about influencing behavior, not generating revenue for the government. Income and corporate taxes are to be adjusted to save people about as much as the carbon tax will cost them, and low-income residents will get $100 each, plus $30 per child.
This has got Canadian environmental poster boy David Suzuki rather excited. Anyway I thought that this was interesting and I wondered if any other nations have carbon taxes. Apparently several do.
Sweden in fact implemented a carbon tax at a wopping .25 SEK/kg (US$100 per ton) back in 1991 although it then proceeded to give all forms of discounts to industry. Although even after those discounts industry has been paying around US$25 per ton.
I’m pretty much of the view that any government initiative to reduce CO2 emissions in Australia should be in the form of broadening the base which the fuel tax applies to. This idea was first outlined to me by John Humphreys in January 2007 and he later published a paper on the topic. The option from that paper that I’m most inclined towards is a A$30 per tonne of CO2 tax. Such a tax if applied to all fossil fuels as a replacement for existing petrol taxes would see the price of petrol decline by around 30 cents per litre and the wholesale price of electricity rise by about 1.8 cents per kWhr.
Of course I would not object if somebody wanted to use a carbon tax to reduce income tax. Any shift away from income tax is a good thing in my view. And if they wanted to simply cut income tax with no new taxes then even better.