Taxing energy-intensive products

Henry Chu of the LA times interviewed Dieter Helm, an economist and professor of energy policy at Oxford University. Helm is a strong supporter of a carbon tax to reduce global green house gasses, but wants the tax to be applied to not only fossil fuels but also to all major energy-intensive products that are both manufactured within the country and imported.

The professor proposes to tax major energy- intensive products like steel, the use of aviation, and ships first, starting with low prices but increasing the tax overtime. This would allow for future businesses to begin making investments in manufacturing products with lower-carbon emissions. Helm is more concerned about carbon consumption as opposed to carbon emissions and brings into example countries like Britain, which are reducing their carbon production but are increasing their carbon consumption. This occurs because they import many goods from other countries like China, thus making Britain essentially responsible for their emissions. Professor Helms proposes what he calls a border tax where imports are also taxed in order to pay for the pollution being done in other countries. He claims that this is a neutral tax since it does not discriminate against where the product was made. Helm likes this approach since it can be implemented slowly. He understands that the west has a carbon economy which needs to become zero or low-carbon. With the carbon tax it can be implemented at first with a low price, and then over time be used on other energy-intensive products therefore increasing the tax. Helm calls it learning by taxing, you start of on the right track and simply adjust the tax until it is ideal.

The carbon tax is already implemented all around Europe like in Finland, France and Sweden. Other countries like Ireland and Britain might also follow suit. Helm estimates that within five or so years most countries in Europe will have a carbon tax. He admits that the tax is not brilliant at the moment but believes that countries will eventually do some fine-tuning to perfect it. Helm also believes that this sort of tax is very possible in the U.S. He also thinks that it will deal with the China question; where industries from other countries wont lose to competition in countries like China since the border tax will allow a neutral price. Furthermore politicians cannot use the excuse “no one else is doing it”, since other places are implementing the tax.

I agree with Helms and believe that this is an excellent way of promoting low carbon and energy products, especially since it would be implemented slowly, it would give time for businesses to come up with ways to provide their products or services so as to limit their emissions. Also, this tax would not allow industries to loose their business to outside production since the border tax will neutralize competition. Unfortunately the tax would directly affect the consumers who are not directly causing the emissions. I still believe that this is a step in the right direction but should not be a major component in cutting a country’s green house gas emissions. I believe a tax that would significantly reduce emissions should be put on the polluters rather then on the consumers. The polluters are the direct source of the problem and it is their actions that will determine how much pollution they will emit. An economic incentive policy similar to the one implemented in the United States to reduce sulfur dioxide emissions would yield the quickest and most effective results.

Professor Helm’s proposition for a carbon and border tax would promote businesses to invest and use efficient technologies to emit less and would eliminate competition from other countries, thus preventing negative effects on the economy. However this type of tax will be directly punishing the consumer as opposed to the manufacturer. Helm’s tax should be used to promote efficiency but an economic incentive should be used to significantly reduce a country’s green house gas emissions; this way, it will yield more substantial results.

Helm, Dieter. "'Carbon tax' is sensible, and perhaps inevitable, advocate says -- latimes.com." Los Angeles Times - California, L.A., Entertainment and World news - latimes.com. LA Times, 12 Nov. 2009. Web. 26 Nov. 2009. .