The Tax Man could be coming for your wallet in 2040, but it might actually be a good thing. A recent study conducted by Ohio State University has concluded that introducing a carbon tax could have significant economic advantages in curbing carbon emissions.
With current net-zero emissions goals set for 2050 by many U.S. states like California, ideally, our carbon footprint would already be diminished by a substantial degree. Citizens who are on board with carbon emissions reduction would be less impacted than those who are not. The tax operates as an additional incentive to citizens and states who are hesitating on net-zero compliance standards.
Specifically, a carbon tax would increase the prices of fossil fuels (like gas for those without non-electric cars) with an overall goal of shifting attention to renewables that benefit public health, the longevity of the environment, and the climate.
Researchers from OSU compared three proposals geared toward phasing out fossil fuels: renewable portfolio standards, production taxes, and a carbon tax. Of the three, they concluded that a carbon tax would be the most economically beneficial and produce the most noticeable results.
For those unsure of the legitimacy of a carbon tax, here’s a break down of what the other two proposals look like:
- Production tax credits would reduce the total tax liability for a share of certain clean energy investment costs. Meaning they would act as a subsidy or partial compensation to incentivize green energy. This could be effective to empower the renewables market but would do little to de-incentivize fossil fuel production. It would also take place on a business level outside of the public eye.
- By focusing on renewable portfolio standards, the encouragement of renewable companies that meet certain standards would increase. It would involve a form of selection and financial incentive for green energy companies that meet certain criteria. It would vary depending on market influence and, again, would primarily take place at a business level outside of the public eye and Wall Street.
- Carbon tax proposals are currently under review in countries like the United Kingdom, the United States, Australia, and India. Different iterations comparing implementation strategies are being considered, like redistributing benefits to citizens or lowering income taxes. The proposal with the most momentum suggests a global carbon tax for all countries, as this would be an agreed-upon economic standard.
- Countries like Canada project that more citizens would get money back from a carbon tax than from the extra electricity costs as prices invariably rise. This suggests that the financial incentive for private citizens may also be of greater value than other proposals under review at this time.
- 2040 is still a ways off, but the net-zero commitment is coming. An environmentally conscious world is dawning, and it’s up to us to get with the program.
For more information on how your family can reduce their carbon footprint, check out our article: Energy Efficiency Explained.