Carbon Tax, The Price of Mother Nature

The phrase “untold suffering” is sure to strike fear into the hearts of even the bravest of men. Such a phrase may sound like it came out of a fantasy film or an ancient prophecy, making it all the more devastating to hear the exact same warning from 14000 scientists worldwide.1 In the paper published in the scientific journal Bioscience, thousands of scientists across 153 countries warn the world of impending climate doom if we continue our inaction towards climate change.1

The effects of climate change are no longer subtle, evident from the wildfires and hurricanes that happened this year. Source: AP News

The study was based on 31 indicators that measure the resilience of Earth to the actions of mankind depleting natural resources and raising the greenhouse gas emission rates, such as deforestation rates of the Amazon rainforest, ocean pH and temperature changes, the trend of extreme weather events and the fluctuations in temperatures worldwide. It is disheartening and shocking to note that 18 of the 31 records have reached record levels, and not in a good way. For instance, glacial thickness has reached an all time low, melting 31% faster than it did 15 years ago. On the other hand, greenhouse gas emissions have peaked from 2020 to 2021. It is exceptionally worrying to note that 5 of the world’s hottest recorded temperatures occurred in the past 5 years, with 2020 and 2016 topping the charts as the hottest year for humanity.1 These are not statistics we should be proud of, but rather ashamed about.

Even during the COVID-19 pandemic, where consumption habits and transportation use decreased remarkably, greenhouse gas emissions dropped early in the pandemic before rising back to the pre-pandemic levels.2 Therefore, we can no longer accept the status quo and adopt a nonchalant, laissez-faire attitude towards the impending climate crisis.

Earth has its own natural warming system known as the Natural Greenhouse Effect that keeps Earth warm. However, this effect is intensified with the growing amount of greenhouse gases in the atmosphere, causing global temperatures to rise. Source:Center for Sustainable Systems, University of Michigan

Greenhouse gases play an important role in our atmosphere as they help trap solar energy from the sun, ensuring that Earth remains warm and habitable for life to thrive. In fact, it is estimated that without the greenhouse effect, Earth would have an average temperature of -18°C, which would not support most species.3 However, the ubiquitous use of fossil fuels (coal, oil, natural gas) has led to an enhanced greenhouse effect, where the additional greenhouse gases emitted during the combustion of fossil fuels trap more heat than necessary in our atmosphere, disrupting the natural climate. As long as the world prioritises the economy over the environment, the world will get richer at the expense of our planet’s health. Current predictions estimate that by 2040, the global temperature will rise by 1.5°C.4 While this increase may not seem significant, the repercussions of this temperature rise are more consequential than expected.

NASA expects that once in a decade heatwaves like those experienced in India and Pakistan in 2015 may become annual events. Source:Reuters

NASA data shows that a mere 1.5°C increase in global temperatures could dry up river basins in the Middle East and East Asia, subjecting those who rely on these river basins to water stress, while food shortages may occur due to decreased crop yield from a hotter climate. Meanwhile, extreme weather events are expected to occur more frequently, with cities bearing the brunt of heatwaves as compared to more rural areas due to the urban heat island effect, where structures in the cities such as pavements, buildings and roads absorb and retain heat, intensifying the impact of a heat wave. Furthermore, the greater latent heat in the environment allows the atmosphere to hold more moisture, resulting in stronger and more torrential storms. These are expected to happen more frequently in the high latitudes of the Northern hemisphere (Northern Europe, Canada, North Asia, Alaska, Greenland), and hurricanes are expected to dump at least 50% more precipitation than if global temperatures remained the same.5

Ocean oxygen levels will decrease, and this would lead to more dead zones where no aquatic life can be supported. Source: ARC Centre of Excellence

Natural biodiversity is also disrupted, and 6% of the report's studied insects, 8% of plants and 4% of vertebrates will see their climatically determined geographic range reduced by more than half. This loss of habitat will eventually lead to the mass extinction of species that are unable to adapt to the sudden change to the climate.5

The consequences are dire, and our apathy and disregard for the environment will not only punish us in the future, but subsequent generations as well. As an iconic dog in a burning room puts it, “this is (not) fine.”

So let’s act.

According to IMF research, global fossil fuel subsidies amount to a staggering US$5.2 trillion! This is equivalent to almost 7% of the global GDP.6 The implications of this statistic are grim. As the world spirals towards a climate calamity, governments are actively forking out trillions of dollars to fossil fuel subsidies to accelerate the process. The IMF believes that if fossil fuels were not subsidised in any way, then global greenhouse gas emissions would have been 28% lower, and deaths from toxic air pollution 46% lower.6

The conclusion from the research is therefore rather simple. If we cut subsidies for fossil fuels and start taxing firms for their carbon emissions, then the carbon emissions and toxic air pollution in the atmosphere would drop, and humanity would be more successful in mitigating the climate change issue.

Widely considered as the most effective measure to mitigate the greenhouse emission problem, scientists and economists have long considered carbon taxing as the most impactful and direct method to combat against the causes of climate change.7,8,9

The aim of carbon taxing is simple. By taxing carbon emissions, it discourages firms from producing greenhouse gases to save on costs. Studies have shown that steadily increasing the carbon tax from US$15/ton and $10 more yearly would cut fossil fuel pollution by 30% in the first 5 years alone, allowing countries to hit the carbon emission targets set by the Paris Accords easily.10

At the same time, prioritising the environment does necessitate that we give up our economic growth. There is general consensus among economists, whether it be economists with expertise in climate economics, resource economics or even economists from all sectors that carbon taxing is the most efficient market-based mechanism to correct the inefficiencies in the carbon emissions market.9,11,12 In fact, economic analysis of carbon taxes has been thoroughly analysed and advocated by economists.13

Diagrams of how carbon taxes help to correct market inefficiency, with analysis from the source. The study of carbon taxes is taught as early as in introductory economics classes. Source: Economics Help

Often, people believe that carbon taxing remains ineffective as firms can simply pass on the higher cost of production to consumers instead to protect their profits. However, Christopher Knittel, a Professor of Applied Economics, suggests that proper structuring of carbon taxing such as giving out carbon dividends (distributing carbon tax revenue to consumers), can help consumers adjust to the higher cost of goods and services. Additionally, carbon dividends encourage consum