Original Post by Ed Piersa:
Unfortunately, I don’t believe that one country – or a small number of countries – instituting a carbon tax would be sufficient on a global scale. Even if that country were the United States or China, it would only represent a fraction of the world’s carbon dioxide emissions. For example, China accounted for 30%, the United States for 15%, the European Union for 9%, India for 7%, Russian Federation for 5%, Japan for 4%, and other countries for 30% of all carbon dioxide emissions in 2014 (United States Environmental Protection Agency 2019). Even if China’s carbon dioxide emissions were completely eliminated, there would still be far too many greenhouse gas emissions in the atmosphere.
There are also transboundary pollution issues to contend with as well. Pollution does not obey imaginary border lines between nations. As the United States Environmental Protection Agency (2019) explains, “Although most air pollution problems are caused by local or regional sources of emissions, air pollution does not stop at national borders. Transboundary flows of pollutants occur between the United States and our closest neighbors, Mexico and Canada, as well as between North America, other continents, and sources in the global commons such as international shipping and aviation. Some air pollutants are known to circulate globally and deposit on land and water bodies far from their sources.” Thus, a global carbon tax is needed – not only one for a few nations.
United States Environmental Protection Agency. 2019. “Global Greenhouse Gas Emissions Data.” Last modified September 13, 2019. https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data#Country.
United States Environmental Protection Agency. 2019. “Transboundary Air Pollution.” Last modified March 11, 2019. https://www.epa.gov/international-cooperation/transboundary-air-pollution.
Comment by Professor Thomas:
In addition to the negative outcomes that you outline, there is also the foreseeable result that the self-imposed , unilateral taxes would penalize the producers of those counties relative to their international peers.
If multi-national, it is predictable that these firms would move production elsewhere to seek lower production costs. We can see this behavior in manufacturers leaving California for Nevada and Texas (for example Tesla, Switch, and other companies building large production and distribution facilities in the worlds largest industrial complex – the Reno-Tahoe Industrial Center).
Ed and Professor Thomas,
I concur, it is not effective for one country to institute a tax unilaterally. Great points addressing the interconnected foundation of the greenhouse gas emissions global problem. The shared responsibility of emissions combined with transboundary pollution issues would make it difficult for a unilateral tax to make significant progress.
I am continuing the discussion of how producers factor into a situation with a unilateral tax. In my example, I determine whether both an internal trading scheme and unilateral carbon tax is feasible in China. A studyLinks to an external site. shows, for the majority of regions within the country, an emissions trading scheme (ETS) is more effective in cutting CO2 emissions compared to a harmonized carbon tax (HCT); however, the same is not true across the entire country (Duan 2016). The authors acknowledge it would be easier to create synchronicity amongst regions within China’s central government compared to a worldwide agreement because under one administration there is a relatively collective interest.
The literature review begins by explaining the majority of projects investigate cost-effectiveness of an ETS or HCT for a certain industrial sector rather than considering the tactics at the national or regional level. The discussion of ETS and HCT within a single industry brings America’s recently established Safer Affordable Fuel-Efficient (SAFE) vehicles rule into consideration. The ruleLinks to an external site. requires automakers to increase fuel economy across their fleets by 1.5% a year, with a goal of achieving an average 40 miles per gallon by 2026 (McDonald 2019). Since the rule applies to car models starting from the year 2022 and younger, it is unclear whether the initiative is effective. However, the study from China reveals insight regarding a unilateral ETS and HCT within a country.
The key distinguishing factor is inconsistency between characteristics of the regions. In China, the diffusion of non-fossil technologies in regions that act as permit sellers perform much better than the new conditions in permit buyer regions (Duan 2016). For example, according to the study’s model, the shares of non-fossil energy in 2052 for the representative sellers, such as EASC (Jiangsu, Zhejiang, Shanghai) and SOUC (Fujian, Guangdong, Hainan), are 28.4% and 22.5%, respectively, versus 6.7% and 8.4% for the buyer regions BJTJ (Beijing, Tianjin) and CENC (Shanxi, Henan, Anhui, Hunan, Hubei, Jianxi). In addition, model results reveal that some developed regions act as sellers, while some developing regions act as buyers. This implies that the uncertainty on the relationship between levels of economic development and market positions of emitters still exists at the regional level. The authors concluded, at the regional levels, governments should pay attention to coordinating the development of non-fossil technologies with carbon reduction actions, as permit buyers and sellers may need different policy portfolios to promote the technological diffusion.
That being said, the study’s authors explain a policy portfolio of ETS and HCT on various industrial sectors, in comparison to a purely nationwide carbon tax policy, is optimally efficient in terms of reducing emissions at a low cost. Further, neither ETS nor HCT provide enough incentives for the breakthrough of carbon-free technology (Duan 2016). That being said, the authors call for subsidies, as well as research and development investment, to supplement the strategies.