Rethinking the Carbon Tax in the Wake of Recent Severe Climate Events

If there was ever a time to reconsider the logic and purpose of the carbon tax, it is in the wake of the severe weather events that have caused so much damage in British Columbia this past week and last summer. 

The proponents of a 'revenue neutral' carbon tax, where the revenues are dedicated to the reduction of income or other taxes, see the carbon tax solely as a means of providing incentives to reduce fossil fuel use and associated GHG emissions. Encouraging households and business to reduce emissions is clearly critically important. And imposing a carbon tax, as virtually all economists will tell you, is an economically efficient way to do that. 

But carbon taxes would have to be an order of magnitude greater than current levels to meet the emission reduction targets that are needed to limit climate change to so-called manageable levels. And a revenue neutral carbon tax won't address the immediate challenge governments face as a result of the climate change we are already experiencing and which is likely to get more severe. 

There are huge expenditures that must be made to deal with the widespread damages caused by severe climate events like the flooding in recent days. And there are huge investments in public infrastructure and services that are required to enhance the preparedness and resilience of utility, transportation, municipal and other government services in order to mitigate the damages of future events.

Right now those expenditures will either come at the expense of other needed and almost universally underfunded health, education and other public services or be funded by increased income, sales or other taxes. That of course raises the obvious question: why shouldn't the costs of mitigating and addressing damages be paid for by the activity most directly responsible -- fuel use and the GHG emissions it causes.

The most obvious logic for and purpose of the carbon tax is to generate the revenues government needs  to pay for the costs climate change is already and will increasingly cause. We shouldn't be asking hospitals and schools to forego needed funds or workers and business to pay higher income taxes to pay for that. We should be expecting those most directly responsible to pay.

We need a carbon tax that is at least as high as required to cover the costs GHG emissions are causing. You don't need economic theory and price elasticity estimates to justify the tax. You just need the common sense requirement that costs must be paid for and those responsible should pay. You might even find a lot more understanding and support for the markedly growing level of tax that is required.