Drawbacks of the Carbon Tax

By Anthony Passalacqua (CE ‘18)

To begin, the Republican platform is most likely wrong on the science of climate change. I am no climatologist and neither are most politicians, so I will take the safe route and agree with what seems to be the prevailing theory amongst trained scientists—humans have a measurable impact on the climate of the Earth due to our carbon based emissions. With this truth out of the way, I will now argue against the carbon tax, which seeks to reduce carbon emissions by taxing companies that emit a lot of carbon. It seems a fairly straightforward and simple solution: if companies have to pay to emit pollutants, then they will stop pumping out pollutants. However, like many simple solutions, this is only skin deep, and does not address the problem
adequately.

The first problem lies in the fact that many large scale manufacturing operations, of the type which tend to emit hundreds or thousands of tons of carbon, tend to be on the slim slide, profit wise. Environmental regulations and large corporate taxes make them hard to maintain in the United States. This is why many—as Republicans truthfully point out—have already moved to smoggier pastures with the passing of NAFTA.

Being that the remaining operations in the United States are necessarily less profitable than they once were, it stands to reason that additional taxation could easily push them over the edge, from the black into the red. In a less globalized world, this would be the end and the problem of emission would be solved. However, we live in a world of free trade agreements, and the problem becomes significantly more complicated.

Capital, in our increasingly globalized world, is extremely easy to move, and often moving it does not carry a large tax burden. This effectively means that if a factory is just barely in the red in the United States, it can move to Mexico or China, and leverage the cheap labor and small import taxes of the United States to once more become profitable. This carries along with it its own moral problems of exploitative labor and hurting the American economy in exchange for helping the global economy at large, but we will set those aside for now and focus on emissions.

So our hypothetical factory has moved to, say, China, for the sake of our example. At this point they are operating within an entirely new legal framework. No longer are they bound to even the now laxer rules of the United States Environmental Protection Agency, but instead to the Chinese Ministry of Environmental Protection.

With disasters ranging from the infamous smog of larger Chinese cities to huge explosions on the streets resulting from greased palms signing off on bogus plans, the MEP is not exactly a robust organization. This means that the company which has only just moved overseas can go back to its old ways, and with a few bribes here and there, pollute the environment to its heart’s content in order to grow profit.

In this way, a carbon tax actually serves to set back the progress we’ve made in reducing emissions and cleaning up the environment. The company in question in fact does not reduce the emissions it puts out, as the carbon tax was meant to cause, but instead moves overseas where it can pseudo-legally increase its emissions. By backing a carbon tax, one effectively backs even worse carbon based emissions, and only worsens the climate change that said emissions are causing.

This is hardly the only downside of American businesses moving overseas. Think what you want of the minimum wage of the United States, right to work states, and the like, but it is a fair claim to make that the average factory worker of the United States is significantly less exploited than the average factory worker of China (where, I must remind the reader, companies such as FoxConn have had to put up nets outside of their dormitories in order to stymie suicide attempts).

Furthermore, this arrangement means that the lion’s share of taxes that the company will be paying will go to the Chinese treasury, rather than that of the United States, directly hurting the American economy by reducing its tax base.

To shift gears, the Republican platform actually goes even further in the opposite direction of the carbon tax, seeking to make environmental regulations laxer. The argument continues thusly: supposing that reducing regulations makes a business that has moved to China once again profitable in the United States, then companies will once again move back to the States from abroad. Here they will have to adhere to the laxer-than-now but stricter-than-in-China environmental policies, thus helping the environment. Of course, this argument also relies on the fact that other parts of the Republican platform would also make it less profitable in general for companies to operate oversees; that, however, will be left for another time.

I would be lying if I made the claim that these are the reasons that most Republicans have in attacking the use of the carbon tax. Many, including our nominee, believe that climate change is a lie made up by China in order to damage the United States economy. However, I hope that this presentation of a deeper look at the carbon tax has revealed that it is likely a poor solution to the problem of carbon based emissions. ◊

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