Politicians are getting greener and greener and overbidding each other with climate initiatives, especially in countries where elections are close. But they continue to dance around the only really efficient way to reduce carbon emissions: a tax on carbon emissions put on any form of fossil fuel. Industry and other companies must not be exempt from this tax. It should also be constructed in such a way, that imported goods are taxed according to their carbon emissions.
It could be implemented gradually, let us say over 5 years.
Opponents will argue that no country can implement such a tax, because it would undermine domestic competitiveness. Let me answer that argument with a quote from the book “People, power and profits” by Joseph Stiglitz, one of the most renowned macro-economists (from page 206):
”There are other taxes that can simultaneously increase economic performance and raise revenue. For instance, a tax on carbon emissions reminds households and firms that we must reduce our carbon emissions. In the absence of such taxes, individuals don’t take into account the social cost of their carbon-emitting activities. Such taxes would also incentivize investments and innovation that reduce carbon emissions,”.
The CO2 tax would stimulate investments in technology to avoid the CO2 tax; exactly the kind of investments we want and need. It is a pure win-win: our CO2 emissions will decrease, and it will stimulate economic activities. Hopefully it will be possible to avoid at least some of the worst consequences of climate change; They will really be costly for all parts of the society.
It would of course be advantageous to have this tax implemented at the EU level or higher. But every country should be allowed to find its own model.
The revenue from this tax should replace income tax and corporate tax. The general level of taxation should not increase.
What are we waiting for???