Big businesses are asking world leaders to do more to address climate change. The top executive from these companies – BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total – called for a tax on carbon emissions. What they are asking for is for an efficient and predictable policy to limit greenhouse gas emissions. Thus, a carbon tax would raise the price of fossil fuels, with more taxes collected on fuels that generate more emissions. The objective for this tax is to reduce demand for high-carbon emission fuels and increase demand for lower-emission fuels like natural gas, solar, wind, nuclear and hydroelectric that would face lower taxes or no taxes. The tax must also be applied to imported goods from countries that do not asses a similar charge on the use of fossil fuels. In the United States, federal and state taxes on gasoline and diesel are effectively carbon taxes. Yet, at the federal level these taxes have not increased since 1993.

However, not all the businesses agree with these taxes. This is why Christopher Knittel, an expert on energy economics at the Massachusetts Institute of Technology, says that a properly calibrated carbon price in the United States could effectively replace all the climate-related regulations businesses do not like, including renewable fuel mandates and President Obama’s Clean Power Plan. That would create a clear incentive for businesses and consumers to use less fuel, invest in efficiency and switch to cleaner energy. The only other necessary action, in Professor Knittel’s view, would be more government support for research and development to accelerate the quest for new energy technologies.

References:

• (2015, June 06). The Case for a Carbon Tax. Retrieved April 19, 2016, from http://www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbon-tax.html
• Porter, E. (2016, March 01). Does a Carbon Tax Work? Ask British Columbia. Retrieved April 19, 2016, from http://www.nytimes.com/2016/03/02/business/does-a-carbon-tax-work-ask-british-columbia.html