The Complexities Behind a Carbon Tax

Can we shift away from the notion of a people-based tax in this era of outsourcing and offshoring?
  • Transcript


Question: Should we tax carbon emissions? 

Amit Chaterjee: The reality of the situation is, an additional tax through carbon may not be what the economic system can bear. The reality is, carbon tax or any sort of energy tax has to be offset against what are the taxes that you’re going to move away from. Payroll tax, as an example, is something that’s been around since Otto Von Bismarck’s time. The question is, could we shift away from that notion of a people-based tax, especially in the era of outsourcing and offshoring to one of, what’s the energy intensity of what you do from product and service standpoint? 

And so I think there are three reactions when we talk about the tax notion. Right? The first is, is it actually a meaningful proxy for natural resources consumed? Secondly, what’s the emotional tie to it? And thirdly, whether it’s feasible, whether or not organizations should be able to deal with it. 

On the first, the notion of, is this a correlation to consumption or natural resource impact. The answer is, if you look at where energy sources come from and how you deploy your business or your organization the answer is, there is a correlation to... if I’m taxed on the energy consumption I use, and I create a product or service, I’m probably consuming some form of that carbon issue. 

Secondly, the emotional issue. Taxes are a third rail in the United States. Taxes are a third rail in the U.K. Frankly, taxes are a third rail in every government-run entity today in the world. As a result, the term tax makes it almost un-viable. As a result, the term tax makes it almost impossible for organizations to actually deal with a way to move forward. Governments can’t propose a carbon tax. 

Thirdly, when we think about the feasibility of this, you know, identifying where you built something and what energy source you used is a highly distributed and highly complex story. Very many high-tech manufacturers today, very many clothing manufacturers today have no clue where their textile manufacturing facilities get their energy. They have no idea where the assembly of their laptop or their cell phone, or their mobile device was created. So, as a result, how do you actually create the tax? Do you create it at the Wal-Mart shelf, or do you actually create it at the source of where the product was created and bought?

Those kinds of questions around the tax issue make it a little bit more complex in compromising versus focusing on the cost-reduction opportunity of energy efficiency and secondarily, the opportunity to grow revenue through taking advantage of the post-carbon economy.

Recorded on May 19, 2010
Interviewed by Jessica Liebman