May 11, 2008

The Case For A Carbon Tax

At last, those, like The Hive, who have been arguing the case for a carbon tax as the way forward in the short term, appear to be listened to. According to Fran O'Sullivan writing in the Herald on Sunday

The case for instituting a small carbon tax while the nuts and bolts of the Government's proposed emissions trading scheme are worked through is gaining currency in business circles.

The theory goes the proceeds of such a tax - a kind of "green money-go-round", if you will - would be diverted to a raft of projects that would reduce greenhouse gas emissions.
Some business organisations believe the tax should be revenue neutral and offset through direct personal and company tax cuts.

It's a theory I have some sympathy for, given the lack of time the select committee studying the emissions trading scheme has to deal with all the complexities of this fundamental shift in New Zealand's economic settings in a rational way with a general election pending.

Rather than produce another "camel", which will have to be reworked later, politicians should expend the time to get the scheme right but use an interim tax to start to shift behaviour.

In the diplomatic understatement of the century Fran goes on to note that "Internationally, carbon markets are going through a rough patch"

While it is great that some business groups are now thinking the right way, the challenge now is to convince National and Labour (the Greens already favour a carbon tax).