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I am professional energy journalist, writer and editor who has been chronicling the renewables and fossil fuel energy sectors since 2008.  I am passionate about the energy transition, so much so...

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  • Nov 11, 2021
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On paper, a carbon border tax is the perfect mechanism for coercing trade partners to reduce their emissions and, potentially, delver a global deal on carbon pricing – the Holy Grail of COP26. In reality, world leaders are unlikely to agree on rules for a global carbon market, meaning border taxes will be introduced unilaterally. These will punish exporting countries that do not decarbonise their energy-intensive products, even if development finance promised to help them transition fails to materialise.

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Bob Meinetz's picture
Bob Meinetz on Nov 11, 2021

Seb, adding a tax to things people want - income, purchases, gasoline, etc. - is hard enough. Adding a tax to carbon, something few want or need, is a mission doomed to failure. That's probably why the oil and coal industries find them so attractive - they seem so full of potential. But even when enacted (rare), there are unlimited ways to circumvent them.

There is exactly one carbon tax that has proven successful at lowering carbon emissions: the revenue-neutral carbon tax, also known as fee-and-dividend. Here's how it works:

1) A low tax is levied on all hydrocarbon-based fuels entering a jurisdiction: gasoline, oil, coal, kerosene, etc., whether at the border, the wellhead, or the mineshaft.
2) Each month, after deduction of administrative costs, the entire collected sum is divided into equal parts and distributed to every taxpayer in the jurisdiction.
3) Gradually the tax is raised.

Though everyone pays more for fuels that emit carbon, everyone gets a check, whether they've used hydrocarbon fuels or not. If you use less than the average person uses, you actually make money. If you use more than the average, you pay. In this way everyone is either rewarded or punished in exact proportion to the amount of carbon they use.

In British Columbia, this "carrot/stick" approach has reduced gasoline consumption by more than 20%, and remains overwhelmingly popular. Because it's so successful, however, fossil-fuel interests have lobbied heavily against it. That, of course, was expected.

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Seb Kennedy on Nov 13, 2021

Thanks Bob, I was not aware that BC had a fee-and-dividend mechanism in operation. I’ll look into it

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