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A revenue neutral, comprehensive carbon tax is the least bad option

European Business Correspondent Eric Reguly

Fred Lum/The Globe and Mail

This is part of Fort McMoney, an interactive documentary game that lets you decide the future of the Alberta oil sands, and shape the city at its centre. Joining the fray – and sharing their views along the way – are Globe columnist Margaret Wente and business reporter Eric Reguly. Read the introductory columns written by Mr. Reguly and Ms. Wente.

This week they debate the question: Are carbon taxes a good idea? Read Ms. Wente's view.

If you agree that carbon emissions have to come down to take the edge off global warming, or, if you are a climate change skeptic, simply to reduce smog and other lung-unfriendly pollutants – how to do it? Milk the taxpayer to subsidize renewable energy? Launch a carbon-trading market? Tighten energy-consumption regulations on appliances and cars? Carbon taxes?

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Each has its flaws. The carbon trading markets, for instance, have been an abject failure. Europe, that fraud-prone market, was flooded with carbon credits, pushing their value down to almost nothing.

The least bad option is a comprehensive carbon tax that applies to all hydrocarbon fuels, from gasoline to propane. It is democratic, since there are no exemptions. It is easy to administer, since if there is one thing governments do efficiently, it is collect taxes. It gives each consumer the freedom to determine the energy use that best suits his or her budget. But is it fair? Only if it is revenue neutral, that is, if the extra tax income is offset with lower taxes elsewhere.

And it works, at least the one in British Columbia, considered a global model, does. An independent study found that per capita fuel consumption in B.C. fell 17.4 per cent in the tax's first four years (to 2012) while greenhouse gas emissions fell 11 per cent. And the tax has not harmed the economy. Take that, tax haters.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More


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