The trend internationally to reduce Greenhouse Gases (GHG’s) is through the Cap and Trade approach. Before this method can take effect, the amount of GHG’s that every enterprise will be allowed to emit will have to be determined. This will require enormous amounts money, people, and time. Inevitably there will be a lot of dispute as to these assessments, which will lead to more money, people and time before this system can be implemented. This system also requires the setting up of a trading system to market GHG credits earned by some enterprises to be sold to others. This structure has the potential to make a great deal of money for the corporate elite in management fees and commissions and require a lot of other expenses to operate. Also this system will discourage new businesses from starting or other companies from expanding. In addition to the normal expenses of starting or expanding, carbon credits will have to be purchased.
The enormous costs of this approach to protecting our environment will not in any way directly reduce GHG’s. . It will have the desired effect of reducing carbon emissions, but at a hefty price to all of us because all of these costs will have to be recovered with price increases of fossil fuels etc. In addition, this method requires a lot of monitoring, hence more costs. Experience in Europe has found that this method has also provided a large opportunity for fraud with billions stolen from the system.
So what is the alternative? Direct carbon pricing through taxes in conjunction with tax reductions on the income side is the answer. This will encourage reducing of GHG’s because of increased costs at the same time as providing some tax relief to either help pay for the increased costs and stimulate investments in energy efficiency. Such investments would themselves create jobs. The tax relief on wages would in effect reduce the cost of labor and with corporate income tax reductions our industries would be more competitive thus saving jobs. The shifting of costs from labor to machinery could save jobs by reducing the incentive to mechanize to replace employees. Tax shifting is not a cure all, but a good first step. Many are concerned that the tax relief will be a lot less than the tax increases on carbon emissions, but with Cap and Trade there is zero relief. Secondly, taxes collected by our government are still our money, generally used for the benefit of citizens. Taxes are often not well spent, but that is a separate issue.
Some method of compelling us to reduce our carbon footprint is inevitable and with every change there are winners and losers. We have a choice. With Cap and Trade the corporate sector will be the winners and the rest of us the losers. With taxing of pollution and tax relief on income, some of us will win and some of us will loose but much less than with Cap and Trade. I am not against businesses making money, but there are many ways to make money providing goods and services that are of value to us. Also, Cap and Trade will hurt the bottom line of all businesses possibly stifling the recovery. With tax shifting and the increased investment in the green economy that it will encourage, our economy will be strengthened.