The “debate” should long ago have ended: carbon pricing works.
Study after study has confirmed this. Unsurprisingly, when it costs money to emit the greenhouse gasses that damage our climate, emissions decrease. But please don’t take our word for it! To behold the mountains of data demonstrating that carbon pricing does exactly what it’s supposed to do, visit the links embedded in this paragraph.
Some opponents of carbon pricing simply deny climate science, while others oppose it for ideological reasons. Both groups are misguided. If you accept the science, then no matter what your ideological stripes are, carbon pricing can empower your movement to stop climate breakdown while advancing your philosophical goals. And yes, it turns out that this single policy can advance the goals of scientists, social justice activists, and entrepreneurs all at the same time.
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Without carbon pricing, individuals, governments, and corporations can burn as much fossil fuel as they want. They keep the benefits while everyone else suffers from the resulting heatwaves, hurricanes, and crop failure.
With carbon pricing, polluters pay us compensation for damage to our climate, which we can then use to fund government services (or share with everyone in the form of a monthly check, like Alaska’s Permanent Fund Dividend.) The social costs are transferred from the people to the polluter. Anyone with an interest in polluting must now personally cover those costs to proceed.
Of course, no country is doing enough on climate, whether via carbon pricing or any other strategy. And so, emissions reductions from all strategies have been puny. Raising carbon prices much, much higher, to cover the true costs of emissions, is key.
With that done, we, the public, will be fully compensated for our losses. Or, in other words: carbon pricing brings the climate under public ownership.
But this is not yet understood by some environmentalists, who reject carbon pricing as a “neoliberal”, “market-based” policy hopelessly outmatched by the scale of the problem. Despite the overwhelming evidence that it works, they view carbon pricing as the best attempt of a failed economic model to solve something it can’t.
They couldn’t be more wrong. As explained above, carbon pricing works because it’s a step toward a new economic model in which nature belongs equally to us all.
But it’s even better than that, because carbon pricing is also a step toward our freedom from taxes.
The Georgist insight behind carbon pricing reveals taxation to be no more necessary than lead paint or unpasteurized milk. All three are obsolete, crude technologies which serve, or served, legitimate purposes, but which also cause terrible side effects. Just as we innovated our way to nontoxic paints and pasteurization, we can innovate our freedom from taxes.
Today, to fund government services, we extract revenue from those who add to society’s wealth, and we call it “taxation”. But what if we took our revenue from those who subtract from society’s wealth? What if we demanded compensation for damage, rather than freeloading upon – and thus discouraging – others’ success?
That’s carbon pricing.
To emit pollution is not wealth creation. It is wealth destruction: greenhouse gas emissions degrade the climate, which we use to grow the food that keeps us alive, among countless other things.
Carbon pricing thus provides necessary government revenue without discouraging the creation of wealth. Instead, it discourages pollution, compensates the public for their losses, and – by replacing taxes – frees entrepreneurs and workers alike to own and enjoy the fruits of their labor.
Carbon pricing leaves entrepreneurs free to evaluate whether the costs – the true costs! – of a business decision outweigh the benefits, which they will collect as before. But it’s even better than that, because when carbon pricing replaces pre-existing regulations, regulatory compliance is greatly simplified.
And no court intervention is necessary to award damages for destruction of nature when damages are awarded as a fact of the financial system. Carbon pricing does this through the government services it funds.
Alone, of course, carbon pricing cannot replace all government revenue… but carbon pricing is just one example of post-tax revenue policy. To abolish taxes outright, simply apply the Georgist revenue model to all of nature.
To start, different forms of air, water, and soil pollution can be priced like carbon emissions, with their prices calibrated to bring them within Earth’s ecological limits. Meanwhile, prices for damage to ecosystems can be calibrated to restrict land use as needed. (These prices can be infinite for critical biodiversity reserves, making their destruction simply illegal.)
Next, the government can and must charge fees for private extraction of minerals. If these fees are set high enough – whether by mandate or by auction – they ensure that you, a member of the public, are fully compensated whenever your resources are purchased. Norway’s much-lauded sovereign wealth fund is a great example of this idea in action.
But far greater than revenue from pollution, ecosystem damage, or mineral rights is revenue from occupation of land.
In 1879, when Henry George proposed bringing “land” – which, in economics, includes all of nature – under public ownership, ecological breakdown was not yet a threat, and so he was not concerned with it. Rather, he sought to end poverty.
Many have observed that since the rich burn more fossil fuel than the poor, carbon pricing reduces inequality. But George dreamed far bigger, asking: how, with technology’s miracles creating unprecedented abundance that grows with each passing year, is it still possible for poverty to exist at all?
In short: technological advancement makes it possible to do ever more with the same land. So land becomes more valuable, land rent goes up in sync with productivity, and the landless, renting poor remain destitute.
George realized that if land rent is restored to the public instead of being pocketed by landowners, then labor keeps its fruits, and the root of poverty is undone.
But it’s even better than that, because, at the same time, the abolition of taxes accelerates wealth production, creating unprecedented prosperity for everyone.
It all begins with bringing land under public ownership – a topic covered in great detail elsewhere on this website.
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“Political Economy has been called the dismal science, and as currently taught, is hopeless and despairing. But this, as we have seen, is solely because she has been degraded and shackled; her truths dislocated; her harmonies ignored; the word she would utter gagged in her mouth, and her protest against wrong turned into an endorsement of injustice. Freed, as I have tried to free her – in her own proper symmetry, Political Economy is radiant with hope.” -Henry George
As we’ve seen, carbon pricing and other Georgist policies resolve the grievances of scientists, social justice activists, and entrepreneurs at the same time. By reclaiming nature as humanity’s common wealth, we can protect nature, abolish poverty, and abolish taxation all at once.
Equipped with this knowledge, we could usher in a new era of sustainable, universal, phenomenal prosperity. We must merely choose to.
If you’d like to be a guest writer for RSF on carbon markets or related topics please email our Director of External Affairs at: [email protected].
