CARBON TAX
Today’s most glamorous buzzword is carbon tax. The idea behind the carbon tax is that the polluters should be slapped fine for polluting the environment. It is the cost which you have for damaging environment. Theory of carbon tax is that the polluters will result in lesser emission of carbon, and for violating lesser emission norms the government will earn more revenue in form of tax.
The carbon tax is not new to the world. Sits existence is since from 1990’s. Denmark, Finland, Norway, and Sweden have had the carbon Taxes long back. The concept of taxing carbon was only on papers but in reality it failed in reducing the carbon emissions. In Norway emissions have increased by 43% per capita.
The only country in which carbon taxation have been successful is Denmark. The per capita carbon dioxide was nearly 15% lower in 2005 than in 1990.
There had been various elements to Denmark’s success which are as follows:
1. The first lesson towards successfulness of carbon tax is to change the mindset of policy makers. Policy makers should be prevented from turning tax into cash cow. Income Tax should be reduced. It avoids the temptation to maximize tax revenue. This tax revenue is given back to the industry for developing eco friendly products. The Danish Government gives subsides to the industries for environmental innovations. Thus isn’t put the countries economy at a competitive disadvantage.
2. The second lesson is that the Carbon Tax in Denmark because the Danish policy makers made huge investment in renewable energy. Previously Denmark was more reliant on coal than Finland, Norway and Sweden. As a result the tax gave a reason to switch the investment in renewable energy. The key was providing easy substitutes.
Thus if you want to reduce Carbon emission then we should follow Denmark’s example. (a) Tax the industrial emission of carbon and return the revenue to industry through subsidies for research and investment in alternative energy, cleaner burning fuel, carbon capture technologies and other environment innovations.