Thursday, January 3, 2013

Ireland's Carbon Tax

A roadway sign in Ireland.  Click for photo credit.
One strategy that can be employed to reduce greenhouse gas emissions is to instate a carbon tax on goods and services that cause greenhouse gas emissions.  In most carbon tax scenarios, higher taxes are paid on things like cars, gasoline, and garbage pickup.  Such a tax has been in place in Ireland for the last few years.  You can read an article on the topic here.

A carbon tax is one policy approach to address global climate change.  It is certainly not the only strategy, but it is one advocated by many economists who have looked at the broad issue of global climate change and consumer behavior.

The carbon tax is really a tax on behavior similar to the cigarette taxes in the United States.  Such taxes are put in place to try to change behavior by making the costs of purchasing items prohibitive or expensive.  They are a controversial and effective way of modifying consumer choice.

In Ireland, greenhouse gas emissions were reduced 15% since the tax was implemented.  Some of the reductions are certainly due to the economic slowdown.  Nevertheless, individuals are purchasing more efficient cars and manufacturers are creating energy efficient products.  In addition, recycling has increased significantly.

In a perfect world, the funds raised would go toward supporting greenhouse gas reduction strategies.  However, in Ireland they were used to reduce their high deficit by 25%.

Critics of the carbon tax believe that it disproportionately impacts the poor.  The wealthy certainly can afford to pay more for gasoline or cars.  Those at the bottom of the income scale are impacted the most by these types of taxes.

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