In many cases, solutions concerning the economic crisis and resolutions regarding the environment do not go hand in hand. From politicians focusing policies on financial issues to the everyday person hesitating to spend extra money on organic food, the recession does not seem to allow much room for green initiatives. There may, however, be a way for environmentally conscious economists to have their cake and eat it too.
According to a recent study published by the Manhattan Institute, the U.S. tax code is formatted in a way that currently punishes efficient energy sources.
Dr. Gilbert Metcalf, professor of economics at Tufts and a leading researcher on the study, is a leading authority on energy and global climate change policy. Examining the results of the study, Metcalf advocates the creation of a new taxation system on carbon in the United States. This tax would hopefully generate revenue, which could be used by the government for research and implementation of renewable and clean energy.
Metcalf explained that today's energy taxation is complex. "Taxes, benefits, complex credit deductions and tariffs ... set up a convoluted system that needs to be simplified," Metcalf said.
He believes that the current policies would make a transition away from carbon fuels both feasible and fiscally beneficial, and he hopes that such policies would create the backbone for a new U.S. climate change program.
Previous proposals have suggested taxing individuals for their vehicles' emissions; Metcalf now suggests taxing carbon while it's being processed instead.
"Fossil fuel is about 80 percent of the greenhouse gases emitted in the United States," Metcalf said. "We can levy the tax on the coal at the mine, right as it comes out of the ground." Metcalf also proposes taxing crude oil as it goes into the refinery, rather than trying to tax all of the cars as they emit the carbon dioxide out into the atmosphere.
According to Metcalf, such a system would have a very low administrative cost but would also raise between 100 and 150 billion dollars a year in tax revenue. "That's a lot of money; so the question is, what do we do with all of that revenue?" Metcalf asked.
To this question, Metcalf offered several solutions. He explained that the program would take into account which households would be adversely affected by the new tax so that, through this analysis, the government could offset the effects of higher energy prices through subsidization, lowering other taxes or offering a tax credit.
Additionally, extra revenue not used to subsidize taxes could be used to fund environmental research.
Raising energy prices, Metcalf explained, would give consumers the incentive to save energy regardless of their socioeconomic status. "We must raise energy prices, or you won't get the results in reduced emissions," he said.
Metcalf's research explores the notion that there is an obvious relationship between energy policy and global climate change policy. He explained that the tax system that should be utilized and manipulated to solve environmental issues.
In an effort to push for these new policies, Metcalf is organizing a conference in Washington D.C. to begin next year. He has invited many experts on the subject to write papers leading up to the conference.
Numerous propositions that attempt to solve climate issues exist, but Metcalf believes that the carbon tax policy is inevitable. "Carbon pricing is absolutely going to happen. Whether my particular ideas are [going to be] taken up? I don't know."
"There are a lot of important issues that the world faces," Metcalf continued. "Climate has certainly got to be one of the top three. I've worked in energy issues for many years. Most of the greenhouse gases are created in energy production."
His own personal lifestyle reflects his commitment to climate change issues. "I drive a fuel-efficient automobile," Metcalf said. He also works one day a week at home in order to reduce his commutes to work, and he heats his home using a wood stove. "Burning wood is reasonably carbon-neutral because it will decompose anyway; you are just speeding up the process," he said.
