Norway’s recent plan to double the carbon tax on oil companies has raised the question: Why don’t many developed countries have a carbon tax system?
The Scandinavian country will double the carbon tax rate from 200 Norwegian Krone (Nkr) per tonne of CO2 (US$35.04) to 410 Nkr ($71.84), along with a fishing industry tax of 50 Nkr tax (US$8.76) per tonne of carbon dioxide.
Meanwhile, Norway is also creating a fund for developing countries to battle climate change. This new carbon tax rate will ensure it gets a healthy infusion of 10 billion Nkr (US$1.75 billion) to support emerging market countries making the transition to a low carbon economy, by developing renewable energy, addressing food security concerns, and mitigating climate change.
World Wildlife Foundation Scottish Director, Richard Dixon, agreed that the Norway carbon tax model could give some guidance to other countries looking to implement a carbon tax policy:
“Norway is showing how you can use oil income to fund the transition out of oil, we should be doing the same with UK oil revenues. The Scottish National Party have always been keen on the Norwegian oil fund, and now it is setting an example really worth following.”
Even with strong support by environmentalists, why have other countries failed to come on board with a carbon tax?
- A large portion of the Norwegian oil industry is owned by the government. With the government owning a 67 percent share in Statoil, the largest oil company in Norway, it makes it much simpler for them to have higher rates in comparison to Australia’s carbon tax rate of A$23 (US$23.79) per tonne after the first 25,000 tonnes.
- The big influence of fossil fuel companies in political campaigns. Many fossil fuel companies have put millions toward campaigns for candidates that support dirty fuels. This causes countries like the United States to have trouble implementing a tax on carbon.
- Spreading false notions of a doomed economy. Driving business away is another scare tactic the fossil fuel industry has used in order to prevent carbon taxes across the globe. However, with Norway ranking third in global exporters and the world’s wealthiest oil and gas sector with the average worker in Norway making $180,000 in the oil sector, one would debate such a scare tactic.
So how can countries like the U.S. advance a carbon tax policy given today’s hostile political environment?
For starters, a carbon tax would provide an extra revenue stream for governments who desperately need it. Some republicans and democrats have argued for the need to look at a carbon tax to bring some fresh funds into government coffers, which could result in some bipartisan goodwill in the midst of our political gridlock.
Secondly, a carbon tax could replace real job killing taxes, including payroll taxes. Isaac Valero-Ladron, an EU representative for Climate Action, said recently that there needs to be a tax structure where carbon is taxed instead of income. Valero-Ladron noted that carbon tax systems have pushed down CO2 emissions, while not hurting economic growth in the region.
Third, a carbon tax would force companies to innovate quicker. In economic terms, if a carbon tax was placed, businesses would have no choice but to innovate through low carbon products. Professor Janet E. Milne, a director of Vermont Law School’s Environmental Tax Policy Institute, said in the New York Times, a higher carbon tax set by governments would send a firm signal to cut carbon emissions dramatically.
Maybe, in the near future, carbon taxes will become a legitimate part of fiscal policy for governments around the world.
Image Credit: Norwegian Oil Rig Via WikiCommons