Is a carbon emissions tax a progressive policy?

In the wake of the failure of last December’s UN Climate Change Conference in Copenhagen to reach even a token legally binding agreement for greenhouse gas (GHG) emission reduction, and with the Rudd Labor government’s patently inadequate emissions trading scam blocked by the Senate, reformist environmentalists have been casting around for an alternative way to try to address the climate crisis within the confines of what is acceptable to the capitalist ruling class. In doing so, they have continued to try to channel action to reduce GHG through indirect, market-based mechanisms, controlled by pro-capitalist governments. The Greens’ proposal for a tax on emissions of CO2 is one such example.

In a media release by senators Bob Brown and Christine Milne on January 21, the Greens announced that they had “written to the Prime Minister, Opposition Leader and all relevant Senators proposing a deadlock-breaking interim solution to get Australia moving ahead with real action on the climate crisis. The Greens propose that Professor Garnaut’s suggestion of a two year carbon price fixed at $20 a tonne be implemented.”

The media release went on to state that this “interim measure in the transition to a functional and effective emissions trading scheme would provide a $5 billion dividend for households and further revenue to invest in renewable energy, energy efficiency and other emissions reducing options.” A later media release, on January 25, clarified that the Greens’ proposal was for a “$23 per tonne carbon tax, to begin this July and apply only to the 1000 worst GHG emitting companies in Australia.”

The proposal for an emissions tax as a “deadlock-breaking solution”, after the blocking of the Rudd government’s Carbon Pollution Reduction Scheme legislation by the Senate, is not surprising — it is the main “alternative” policy to emissions trading that capitalist governments, politicians, and businesses have advanced. Emissions taxes have been implemented in several northern European countries. Supporters of this policy include everyone from mainstream environmental groups and Green parties to notorious climate criminals such as ExxonMobil.

In an interview published in the third 2009 issue of The Lamp, a quarterly magazine produced by ExxonMobil for its shareholders, Sherri Stuewer, ExxonMobil’s vice president of Environmental Policy and Planning, advocated an emissions tax as superior to emissions trading because emissions trading “will increase volatility in energy prices … This volatility … discourages the type of investments needed in new technology that will be required to reduce emissions.”

Stuewer added that “ExxonMobil agrees with many of the world’s leading economists and commentators that a revenue-neutral carbon tax or greenhouse gas emissions fee would be a much simpler, more transparent and more cost-effective approach. It would create a uniform and predictable cost on greenhouse gas emissions across our economy, and it more easily lends itself to global application. A carbon tax is much more efficient administratively since it can be largely built upon the existing tax infrastructure. Considering the recent economic difficulties, it’s important to point out that a carbon tax avoids the complexity and the opportunities for manipulation inherent in building a large, new commodity market.”

On the surface it may seem surprising that a corporation that makes its profits from selling GHG-producing fuels would advocate additional taxes on its products. However, governments that represent the interests of capitalist corporations like ExxonMobil would face massive loss of public credibility if they simply did nothing in the face of the global warming and ocean acidification crises caused by industrial GHG emissions. Given this, it is advantageous for corporations like ExxonMobil to support the popularisation of measures that appear to fight the problem of GHG emissions while having minimal impacts on their ability to profit from this pollution, by passing on the cost of the tax in prices of their products, as they now do with existing fuel taxes.

An alternative ‘market’ mechanism

The reasons that emissions taxes receive support from capitalist corporations like ExxonMobil are the same reasons that such taxes are not a real answer to the problem of GHG emissions. As with emissions trading, emissions taxes attempt to create a “price signal” that is supposed to encourage individual and corporate consumers to avoid purchasing products that release GHGs or whose manufacture or operation involves the release of GHGs. Rather than directly mandating a change in production methods — for example, by banning the construction of new coal-fired power stations and constructing renewable energy generation infrastructure — the government merely sets the price through a tax and allows “market forces” to run their course.

This shifts the responsibility for reducing emissions onto individual consumers (mostly workers who are expected to change their consumption patterns with little or no direct assistance from the government) and private businesses. The higher price of GHG emitting products will supposedly encourage businesses to fund measures to reduce their use of these products. This in turn will supposedly stimulate the growth of new “clean” technologies to avoid emissions taxes and loss of customers eating into businesses’ profits.

In reality, it is the highly profitable, monopolistic corporations like ExxonMobil that would be most comfortable with this arrangement. As long as the taxes were sufficiently low to allow any changes to be made gradually, their privileged access to scientific expertise and technology would let them set the pace and nature of any technological transition — according to their short-term profit priorities, rather than any concern for the global ecosystem that humans depend upon for our survival. This is a recipe, at best, for slow, inadequate emissions reductions, as demonstrated by those countries where it has been implemented.

Denmark, Finland and the Netherlands introduced emissions taxes in 1990, with Sweden and Norway following their example in 1991. According to UN Framework Convention on Climate Change figures, between 1990 and 2007, GHG emissions (with changes in land use and forestry taken into account) dropped by 22% in Norway, 5.6% in Denmark and 2.1% in the Netherlands, did not change in Finland, and rose by 12.7% in Sweden. While liberal-reformist environmentalists often hold these wealthy countries up as some sort of eco-Valhalla, their emissions reductions do not come close to the 40% reduction achieved by socialist Cuba over the same time period with much less resources and without the use of an emissions tax.

Given that the vast majority of rich countries’ emissions need to be eliminated within a few decades to have a chance of averting global climate catastrophe, these figures do not inspire confidence that an emissions tax can deliver the rate of change needed. Emissions taxes in the Scandinavian countries range from $55-$170 per tonne of CO2 emitted. Even with the large discounts in the tax rate afforded to capitalist businesses by the governments of these countries, these tax rates are still well above those proposed by the Greens. It would therefore be logical to assume that the Greens’ proposed tax would have even less impact on Australia’ GHG emissions.

Some liberal reformist environmentalists have suggested that simply increasing the tax rate to a much higher level would make it more effective. But for a capitalist government the whole point of introducing an emissions tax would be to avoid measures that would have a serious impact on business profits, thus leaving tax levels high enough to rapidly reduce emissions off the agenda. Even if such high taxes were introduced, it would not solve the problem of businesses passing on the cost of the tax to consumers, thus unfairly putting the cost of emissions reductions on working people’s shoulders.

Can an emissions tax be made ‘fair’?

To “solve” the problem of the costs being passed on to working people, various emissions tax proposals have included mechanisms to redistribute tax revenues as compensation for price rises. Thus ExxonMobil supports a “revenue neutral” tax where cuts in other forms of tax (e.g., taxes on individual and company income) would equal revenue from the emissions tax. NASA scientist Dr James Hansen has called for an emissions tax to be redistributed at an equal rate to every individual so that those who reduce their direct and indirect emissions more than average actually gain income. The Greens’ emissions tax proposal would hand back roughly half of the revenues raised to low- and middle-income people.

On the surface, this may seem to be a step in the direction of social justice. But by leaving investment decisions in the hands of capitalist businesses, such a mechanism could easily lead to significant portions of the tax revenue indirectly funding polluters’ continued profiteering. Polluting capitalists who pay the emissions tax could pass the cost of it on to consumers, who would have to use the tax revenue that’s distributed to them to pay the higher prices to consume the polluters’ products. This could easily reduce the incentive for corporations to change production methods, in turn reducing the tax’s impact on GHG emissions.

Of course, this does little to help the average working person, who has no choice but to meet their needs through purchasing the products that capitalist businesses make available. This is because, under capitalism, they are alienated from decisions over how and what to produce. Their social interests are irrelevant to those who actually do make the decisions — the tiny minority who own the vast majority of industry.

If the revenue were instead used for government investment in renewable energy and other GHG emission reduction projects, this may be more efficient in reducing emissions. But without any redistribution of the revenues raised by the emissions tax, this will leave working people shouldering the extra tax burden. And if the tax was high enough to generate sufficient revenue to actually reduce emissions by a safe amount, and aid poorer countries to do so as well (without which, any hope of stabilising atmospheric GHG concentrations at safe levels is doomed), that burden would be huge.

Considering this problem, Socialist Alliance member Zane Alcorn wrote in the February 3 Green Left Weekly that “governments must find a way to ensure that it is corporate profits that foot the bill, rather than wildly rising bills for ordinary workers … One possibility for how this might be confronted is the Venezuelan example, where the steel company Sidor was nationalised after refusing to negotiate a collective agreement with workers.”

Who holds decision-making power?

The Venezuelan example, where the revolutionary socialist government of President Hugo Chavez has expropriated the property of capitalists who have failed to cooperate with its pro-worker and pro-poor policies and used that property to support those policies, is a great model for tackling GHG emissions. But it is utterly utopian to think that a capitalist government would take this road. Capitalist governments exist precisely to defend capitalist profits, not to make the capitalist-owned businesses “foot the bill”. The only times capitalist governments nationalise capitalist businesses is when they’ve become unprofitable to their owners and “too big to fail”, and this is done to prop up the profiteering of other capitalist businesses, not to defend the interests of working people.

The Venezuelan government has only been able to nationalise capitalist property to serve the interests of working people because that government is the product of a mass revolutionary uprising — on April 13, 2002 — that broke the political power of the capitalist class. This dramatic inversion of class power meant that the Venezuelan government has been able to take pro-worker and pro-poor measures directly. It hasn’t had to depend on indirect mechanisms to do this, such as taxing capitalist businesses or — worse — working people. The working people’s government can just use the expropriated resources that it directly controls to meet social needs. To fantasise that a capitalist government, like the Australian government, would take similar measures is just self-deception.

This is not to say that no progressive measures could be taken under capitalist rule. But these will only be taken in proportion to mass pressure — and the threat to capitalist power — that progressive social movements can apply. And a carbon tax is not a progressive measure. It is just a diversion that helps the capitalist rulers look like they’re doing something while they drive the planet’s climate towards catastrophe.

In the past few years, protests have emerged against new coal-fired power stations in Australia and in other countries. Though still small-scale in Australia, this is a positive development that should be encouraged. Success on this front would boost the confidence of the climate action movement to then focus on campaigning for the closure of existing coal-fired power stations. Promoting illusions that climate change can be tackled with a bit of tweaking of the capitalist tax system will more likely derail any nascent movement for serious climate change action, rather than help to build it.

Alcorn wrote: “For counterposing the idea of a carbon tax to a trading scheme that leaves emissions reduction entirely in the hands of ‘the market’, the Greens should be congratulated.” But the only people who “should” be congratulating the Greens are those sections of the capitalist class who, for their own mercantile reasons, prefer one indirect, pro-capitalist measure (an emissions tax) over another (emissions permit trading). They know that, either way, the decision-making power of “the market”, that is, the big capitalist corporations that dominate capitalist economies — will continue to rule. The rest of us should be seeking to strip them of their decision-making power while we still have a chance of rescuing our ecosystem, and that can only be achieved through mass anti-capitalist political action.