Protecting the Planet by Taxation

The idea of a personal limits on carbon emissions is not new. It is one of a range of options for changing behaviour to cut emissions. Other options include a carbon tax, or carbon trading where the total permitted emissions are allocated and people or organisations trade the right to damage the planet. See Wikipedia for an excellent summary.

A flaw with any straightforward tax is that it increases the price for everyone. The rich may still be able to squander energy while the poor cannot afford to buy the basics of life. The system may be so unfair that the democratic process will intervene to ensure prices are brought down. Price alone therefore cannot be used to enforce significant changes in human behaviour.

An alternative method of restraining personal consumption is to use rationing, the system in use in the UK during and following the Second World War and in many other countries. That system is probably too severe and would lead to a widespread black market.

Carbon trading – where everyone has an equal allowance but the poor can sell theirs to the rich – is an interesting option but a little unpredictable because the trading price is set by the market. The system has an elegance in that achievement of emissions targets is more or less guaranteed, but the detailed consequences need evaluation.

The Qtax is an intermediate route. It has some flexibility built into it, so that the burden of protecting the planet can be shared in whatever is judged to be an equitable manner. Unlike carbon trading Qtax provides a revenue stream which could be used by local governments and to compensate those nations that bear the brunt of interventions, for example those that retain rain forests or do not exploit fossil fuels.

The Qtax should be more efficient than a plethora of current measures, such as feed-in subsidies for renewable energy, better light bulbs, home insulation, or more efficient cars.  The problem with these subsidies is that they do not necessarily modify behaviour. For example people can drive their more efficient cars more aggressively or for greater distances, wiping out any improvement in efficiency. They can cover their more efficient light bulbs with fashionable shades that let little light out. They can buy bigger homes. Improved behaviour cannot be enforced by technology alone. Technology needs to be introduced by people as part of a set of actions to solve their problems.

Each product is given a Q which reflects the total environmental impact of the resources used in producing it. Thus a tray of blueberries, flown a thousand miles, would have a Q that included the cost of shipment. A similar tray grown locally in a heated greenhouse, would have a Q that reflected the heat input. Both would include packaging and storage costs. People could select the least damaging blueberries, or select some other fruit.

The consumer has a choice. The consequences of that choice are reflected in the weekly Q account which includes the costs of heating,  travel and the rest. Everyone can afford some luxuries, but a consistently wasteful lifestyle becomes very costly.

Suppliers of goods and services are highly motivated to provide goods with a low Q. That is because goods with a  low Q reduce the tax burden of the end user. Low Q goods are therefore more attractive and sell for a higher price. The local tomato industry is aware that every Q used in production must be passed onto its customers. It therefore seeks to find the lowest Q method of heating its greenhouses. They seek the best methods of insulation, and the lowest Q energy suppliers. They look for fertiliser supplies that involve less use of fossil fuels. They seek to pick, store and deliver their produce with minimum energy use.

Qtax would largely replace taxation of income, which is a poor form of taxation, and becomes even sillier as the economy becomes more service based. The central plank of economics is that work is done by those specialists who are best equipped to do it. If I want to get my car serviced it is much more efficient to get it done by a local garage. Why then impose taxes on that operation so that I can save money by doing the work, inexpertly, myself? Qtax is a more effective form of taxation, with fewer unintended consequences for the economy.

Why Q? Because carbon tax and eco tax and green tax already have different meanings. And because planetary  impact involves other things than just carbon emissions – damage to scarce eco-systems, impact on water supply, pollution, and methane emissions from cattle among others.  The make up of Q would need to be controlled by a panel of scientists and experts. Fossil fuels, the various types of bio-fuel, nuclear power, methane emissions, scarce elements, and a range of other inputs into production would all eventually need an agreed Q value.

Taxes would be set by each country with the aim of keeping overall national Q use within the internationally agreed limit. That would take some trial and error during the years when Q tax was gradually being introduced.

In summary Q gets round some of the problems that are preventing agreement on climate change targets.

  1. It allows the market to determine how the reduced Q target is best addressed. That has to be more effective than complex government interventions to promote specific technologies.
  2. It restores personal choice. It is not for the government to micromanage life by telling people what type of light bulb to use. The Q tax ensures that most people choose efficient lighting.
  3. It has some moral basis. Those who waste most pay most. Those who use little, particularly the urban poor, will pay little. The progressive Q tax will allow the poor to heat their homes. The rich pay extra and they are the prime drivers of a low Q economy. In contrast a straight carbon tax simply inflicts high prices on all and the poor go cold.
  4. It provides some basis for international agreement. No doubt there will be a long period while the Q allowances of developed and developing nations converge, but eventually there is a moral basis which is that the privilege of damaging the planet should be shared equally.
  5. All countries will be motivated to join the scheme. Any country that did not monitor Q for its exports would be allocated a relatively high estimated Q by the central panel.
  6. Everyone is motivated to do the little things that, taken across the planet, make a big difference. At present it seems almost pointless for individuals to take action, but that would be different if individual action was part of an international effort. I guess that, in developed countries, 20% of Q reduction could come without fancy technology or major lifestyle change, but simply by everyone taking little decisions better. 20% reduction would be a hugely significant start.

4 thoughts on “Protecting the Planet by Taxation

  1. I’ve been thinking about this over the past few weeks and there are government granted companies where I live who can tax and step in where there are no recyclers – in other words, where the cost of recylcing outweighs the cost of producing new. The tax works, in my opinion. My only and big concern is that the recipients of the tax in the company don’t follow good governance and the tax money never really ends up attacking the problem.

    1. That is an interesting example. Taxes like the one you mention can affect behaviour and in particular they can incline people do things that are better for the environment rather than simply making short term economic sense.
      However when it comes to carbon emissions taxes become more difficult. That is because taxes impact the poor and deprive them of life’s essentials, like heat. That’s why I suggested a progressive tax, that would hit people hardest if they use an excessive amount. It looks complex but the computing capacity in 2050 will make it much easier to implement.
      re the misuse of money gathered from environmental taxes, I think that is a real concern. People will not accept taxes of this sort, especially as they bite harder, unless they are confident that the money gathered is going to do some good.

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