January 21, 2012 — andyextance

Tax is a dirty word to virtually all of us. Burning fossil fuels is making a dirty mess of the atmosphere and causing climate change. But taxing CO2 emissions from the fuel we consume could help clean up both the environment and the stain taxes leave on our payslips. That’s what “the world’s first and only stand-up economist”, Seattle, Washington based Yoram Bauman says. But he’s not joking, and it’s not just an idea either – such a tax already exists in British Columbia (BC), Canada.

“It’s a tax on the carbon content of fossil fuels,” Bauman explains. “Burning gasoline in your car, for example, releases about 19.3 million metric tonnes of CO2 per quadrillion BTU – which in English translates to about 2.3kg CO2/litre. So the British Columbia carbon tax, which will hit Can$30/tonne CO2 this summer, works out to about Can$0.07/litre, or about £0.05/litre. For coal-based electricity the tax amounts to Can$0.03/kWh, or about £0.02 pounds/kWh. Everybody has to pay the carbon tax on fossil fuels that they burn in the province of British Columbia, so that affects companies as well as individuals. In return, they get lower rates for personal and corporate income taxes: every dollar of carbon tax revenue is “recycled” through tax cuts that benefit individuals and create jobs. Now, you could argue that Can$30/tonne CO2 is not enough to dramatically reduce emissions, and that’s certainly true, especially in the short run. But it’s a terrific step in the right direction.”

Back, not axe, the tax

While Bauman emphasises his unlikely sounding ability to make people laugh about economics, both with stand-up routines and cartoon books, he also teaches and does research as an environmental economist. And thanks to that he claims a small role in inspiring Gordon Campbell, the former premier of BC, to push the carbon tax through the provincial parliament in 2008. In 1998 Bauman co-authored a book called Tax Shift with Alan Durning, who said: “Campbell read the book that year and told me he was going to shift taxes in his second term as premier. I didn’t hold my breath, but now he has delivered.” During the election campaign in 2009 an “axe the tax” campaign emerged, but Campbell survived, in part thanks to the backing of environmental groups. “Nowadays both parties support the carbon tax,” Bauman tells Simple Climate. “It seems to be about as well loved as a tax can be, which of course isn’t very much. But everyone seems to acknowledge that getting rid of the carbon tax would just bring their income taxes back up.”

It may seem curious that a region in a country that has just left the Kyoto Protocol has such a tax. But even though it is the main international agreement to fight global warming, Bauman says that he doesn’t think the Kyoto protocol has had much impact on climate change. “I’m actually much more impressed by what BC has done,” he said. “The goal of cap-and-trade policies like Kyoto is to put a price on carbon so that you get market forces working to protect the environment, develop innovative alternatives, all that stuff that we – or at least I – love about capitalism. From the perspective of economists, then, cap-and-trade and carbon taxes are more similar than they are different, and if what you want is a strong price on carbon then the BC carbon tax is probably the best in the world.”

Bauman notes that some criticism of the tax remains from energy-intensive industries like cement producers who face low-cost competition from companies in neighbouring Washington State. However he sees that as just one reason why the CarbonWA group that he’s part of is promoting a similar idea there. “It could work in other countries, too,” he says. “My vision of how humanity can successfully deal with climate change is actually not about Kyoto Protocol-type agreements, which I think would be great but are difficult to enact and enforce. My vision is that some prominent countries – notably the USA – enact a BC-style carbon tax and then use the threat of carbon tariffs to force the rest of the world – notably China – to enact similar policies. It’s not the most polite approach, but I think that’s what will happen.”

Cartoons on this page come from Bauman and Grady Klein’s book, The Cartoon Introduction to Economics, Volume One: Microeconomics. There is also a whole chapter on environmental issues, including climate change, in Volume Two: Macroeconomics. In 2012 he will be performing live comedy shows around the US and Europe in his “Gold Standard” World Tour. The video below is a taster of the kind of thing you can expect.