Tuesday, October 23, 2007

Polluter Taxes

The Polluter Must Pay

The article by Meg Bortin of the International Herald Tribune discusses a poll that was conducted by the Tribune. According to the poll that was conducted in five European countries and the United States said they believed that industrial companies should be taxed according to the amount of pollution they produce. The idea behind the tax is that the “polluter must pay.”

Industry Reactions

A spokesperson at Corus, the European steel maker said they are committed to “minimizing the environmental impact of [their] operations through the adoption of sustainable practices and continuous improvement in environmental performance.” At Total, the French oil company, a spokesperson stated that they didn’t believe the industry was responsible for all emissions of greenhouse gases. Analysts believe that the poll results showed that the public wanted the responsibility for global warming to bear financial responsibility, even if the costs would be passed on to consumers.

Who is Responsible?

According to the article, “Asked who is responsible for global warming, respondents blamed themselves along with industrialists and politicians. Between 54 and 61 percent in the six countries said that industry, governments and people in general were all responsible.”

An Alternative to Taxes

Bortin notes that instead of taxing polluters, the European Union forces the industry to restrict carbon-dioxide emissions that contribute to global warming. “Companies may produce a certain amount of pollution and bear costs if they exceed that level: They must either pay to implement pollution-reduction measures or buy new allowances.”

Tax Everyone?

In keeping with the “polluter must pay” idea, should the participants also be taxed because they presumably drive cars? Automobiles are also responsible for emitting carbon-dioxide into the air. It is true that the participants took some responsibility for their part in pollution, however, the article did not mention that any of them volunteered to be taxed in the same manner they believe the industry’s who also create carbon-dioxide fumes are taxed.

Economic Efficiency/Cost-Benefit Analysis

Can it be said that it is efficient for the industry’s to be taxed, but not the participants of the poll who also pollute? If people were to be taxed for every type of pollution, than even infants who fill dirty diapers with noxious fumes should be taxed! This is not efficiency. One of the costs of taxing polluters is that the cost of goods and services would increase because installing, maintaining, and operating pollution control equipment would be passed on to the consumers in the form of higher prices (Titus 27). In addition, there would be higher costs associated with monitoring compliance with pollution taxes that result from regulations (Titus 27). The only benefit would be that their would not be as much contribution to carbon-dioxide emissions as their would be before the tax. In this case, the costs far exceed the benefit, therefore not allowing for economic efficiency.

Command-and-Control (CAC)

There is already a command-and-control in place in the United States regarding harmful emissions that contribute to global warming. The emission standard is a regulation that states how much an individual and their automobile can produce. The emission charge is a fee paid to the government. Isn’t this fee in a sense already a form of tax? According to the Chicago Study, CAC costs are estimated to be 14 times for expensive than is necessary (Titus 288). CAC are not cost effective nor efficient.


1 comment:

Larry Eubanks said...

I don't understand your discussion under economic efficiency/cost-benefit analysis.

It seems to me that in a general way having polluters pay is consistent with the inefficiency associated with pollution externalities. Whether there are other costs associated with this, unless you are talking about monitoring and enforcements cost, probably has little relevance. For efficiency we want the external cost to become internalized and therefore part of what the polluter sees as the costs of their choices. The polluter pays idea seems consistent with this. Other sorts of costs are already part of our externality model.