The Carbon tax works : the Irish example

We have seen quite a few times that a carbon tax makes a lot of sense as it could literally help solve our most pressing problems : our warming climate and our broken economy. Well, it already does in Ireland.

As the New York Times reports – who else could get such great news ? – Ireland set up a carbon tax three years ago and its carbon emissions has been dropping significantly thanks to it.

If the Irish can do it, why couldn’t the entire European Union, or other rich countries, do it ? While some are just doing nothing, some are acting, and reaping profits. Good job Ireland !

Here are some quotes of the original article :

Over the last three years, with its economy in tatters, Ireland embraced a novel strategy to help reduce its staggering deficit: charging households and businesses for the environmental damage they cause.

The government imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene.

(…) Environmentally and economically, the new taxes have delivered results. Long one of Europe’s highest per-capita producers of greenhouse gases, with levels nearing those of the United States, Ireland has seen its emissions drop more than 15 percent since 2008.

Although much of that decline can be attributed to a recession, changes in behavior also played a major role, experts say, noting that the country’s emissions dropped 6.7 percent in 2011 even as the economy grew slightly.

“We are not saints like those Scandinavians — we were lapping up fossil fuels, buying bigger cars and homes, very American,” said Eamon Ryan, who was Ireland’s energy minister from 2007 to 2011. “We just set up a price signal that raised significant revenue and changed behavior.

Now, we’re smashing through the environmental targets we set for ourselves.

(…) ” Yet when the Irish were faced with new environmental taxes, they quickly shifted to greener fuels and cars and began recycling with fervor. Automakers like Mercedes found ways to make powerful cars with an emissions rating as low as tinier Nissans.

With less trash, landfills closed. And as fossil fuels became more costly, renewable energy sources became more competitive, allowing Ireland’s wind power industry to thrive. Even more significantly, revenue from environmental taxes has played a crucial role in helping Ireland reduce a daunting deficit by several billion euros each year.

The three-year-old carbon tax has raised nearly one billion euros ($1.3 billion) over all, including 400 million euros in 2012. That provided the Irish government with 25 percent of the 1.6 billion euros in new tax revenue it needed to narrow its budget gap this year and avert a rise in income tax rates.

I guess this is definitively something the United States of America should implement instead of bickering about the fiscal cliff and so on… It is also Thomas Friedman’s opinion as he states in one of his recent op ed pieces :

A carbon tax would reinforce and make both strategies easier. According to a September 2012 study by the Congressional Research Service, a small carbon tax of $20 per ton — escalating by 5.6 percent annually — could cut the projected 10-year deficit by roughly 50 percent (from $2.3 trillion down to $1.1 trillion).

What would you rather do to help solve our fiscal problem: Give up your home mortgage deduction and wait two more years for Social Security and Medicare, or pay a little extra for gasoline and electricity? These will be our choices. I’d rather pay the little carbon tax, especially since it would clean up the air for our kids, drive innovation and make us less dependent on the most unstable region in the world: the Middle East.

What do you think ?