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Environmental Economics

Carbon Tax on Gasoline or Other Energy in Washington State

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A carbon tax is any type of tax that is imposed on fuels or energy sources based on their carbon content. Carbon is an element that is present in hydrocarbon fuels such as gasoline, coal, and natural gas. When combusted, it is converted into CO2 as well as other carbon products. Such products lead to the greenhouse effect due to heat-trapping which eventually results in negative climatic changes. Therefore, non-combustion energy sources such as sunlight power, hydroelectric power, and wind power are highly preferred since they do not have negative effects on the environment. Carbon tax leads to both social as well as economic benefits. The latter are obtained when the government gets more revenue without altering the economy. The main objective of a carbon tax is to lower the level of CO2 emitted to the atmosphere as a result of using carbon-based energy. There have been numerous oppositions regarding carbon taxes since most energy sources in Washington State have some amount of carbon. Therefore, the government prefers to impose direct regulations on the level of carbon to be present in each energy source. Following the negative effects of carbon emissions on the environment, I would recommend a corporate tax on gasoline and other energies to be applied in Washington State. Although it will have a direct effect on companies and individuals, a carbon tax will also help in reducing the level of emissions caused by carbon products in Washington State.

Supporting the Recommendations

One of the advantages of imposing a carbon tax in Washington State is the reduction of the level of greenhouse gas emissions. The tax varies based on the amount of carbon produced when fossil fuels are combusted. According to Taylor (2015), greenhouse gas emissions should be approximately 80-95% lower in the next 35 years than in 2000 (Taylor, 2015). One of the ways to hit this target is realized by ensuring carbon tax is imposed in various states. Therefore, individuals are likely to use less energy from fossil fuels so the fees charged by the government be reduced. For instance, a person may opt to use public transportation instead of driving a private vehicle. On the other hand, businesses may opt to increase energy efficiency by using energy sources with less carbon emission.

A carbon tax can also encourage the use of alternative sources of energy by making them cost-effective. Some of the countries that have successfully applied carbon tax include Mexico, Colombia, and South Africa. Although carbon tax can influence mitigating national emissions both positively and negatively, it can also lead to emissions reduction due to the increased adoption of alternative energy sources (Wang-Helmreich & Kreibich, 2018). When carbon tax is imposed, the level of fossil fuel usage will decrease; thus, people will prefer using other sources of energy. Moreover, the funds obtained from a carbon tax can be used for environmental programs aimed at encouraging the usage of alternative sources of energy.

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According to economists, a carbon tax can be used for predicting market trends. For instance, the price of carbon in trade schemes can fluctuate based on economic conditions. This happens because trade schemes have established a specific limit on emissions, which also include carbon emissions. The study conducted by Mathur and Morris (2014) showed that the carbon tax is regressive. Through tax swap simulations, the net effect of the tax on households can be computed to predict the future. Thus, a carbon tax helps predict the future economic conditions of Washington State. Since carbon tax is stable, the utilities, as well as businesses, can know the price of carbon and predict the future. This can help in determining whether to invest in alternative energy or to ensure energy efficiency.

A carbon tax can assist even the most affected society to shift to green forms of energy. Coal production has continued to fall in the US, leading to unemployment and economic decline. If a carbon tax is designed intelligently, it could help in funding the changes in societies that use coal production. The argument that carbon tax can assist countries with coal is counterintuitive (Mathur & Morris, 2014). Moreover, coal producers are highly opposed to a carbon tax because it can reduce the level of consumption. A carbon tax is not bad news in Washington State since coal production is minimal. Therefore, local coal manufacturers are less likely to oppose a carbon tax. Many factors can cause a decline in coal production as well as coal consumption. They include the availability of alternative energy sources and the depletion of coal (which is the raw material).

Innovation in green technology is one of the most important innovations yet among the most neglected. It has trade implications and can help to reduce the level of harmful gas emissions further. Most of the innovations revolving around green technologies have been established by the government; however, private investment in Washington State is required to improve the level of green innovation (Mathur & Morris, 2014). A carbon tax is an important incentive that should be used by various industries to innovate and also develop new green technology. The companies can only innovate in green technology once they are sure that the imposed carbon tax will make individuals prefer other sources of energy.

Many states including Washington State have made a lot of efforts to hit the target set for clean power plants. For the state, a carbon tax could be cost-effective and administrative to comply with clean power plans. There are many households in Washington, and most of them prefer carbon energy (Taylor, 2015). American families also use private vehicles often. Imposing a carbon tax, therefore, helps to minimize private vehicle usage. Most people would prefer public transportation for cost-effectiveness. As a result, Washington State will easily meet its clean power targets without imposing further restrictions on different industries that use fossil fuels.

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Opposing the Recommendations

A carbon tax can have negative effects on low-income households. This happens because after establishing a carbon tax in Washington State, there are no policies that the government can adopt to mitigate the cost for less fortunate households. A carbon tax can affect most of the activities carried out by the common citizens. Although the revenue raised from a carbon tax can be used to support the community, some households may not feel the effect of the community projects since the latter are only aimed at supporting a small group of people (Marron & Morris, 2016). There are already direct and indirect taxes affecting the community in Washington State, and adding a carbon tax is unfair for some individuals with very low incomes. The government is likely to use the revenue collected from carbon tax for carrying out other activities such as increasing the level of spending or reducing the level of borrowing (Marron, D., & Morris, 2016).

The carbon tax will lead to increased administration costs. The tax is very expensive; thus, the government must have a substantial amount of money to implement its policy. If sufficient funds are not available to initiate carbon tax applications, the implementation of the policy would be ineffective. Moreover, it also requires funds to ensure that the policy is fully functional in the entire state. It is difficult to determine the exact cost that the government would need while imposing a carbon tax, but the amount of revenue obtained from the taxpayers is likely to be high considering the number of vehicles available in Washington State. Most critics believe that carbon tax can lead to increased costs (Wang-Helmreich & Kreibich, 2018) because it is likely to increase fossil fuel costs. The latter will consequently increase the level of expenditures involved in the manufacture of products and delivery of services. Therefore, the carbon tax will lead to increased costs for both the government and common citizens.

A carbon tax can lead to a shift in production. This means that although it is expected that companies will adopt other sources of energy, they may opt to relocate as well (Metivier, Postic, Alberola, & Vinnakota, 2017). Anyway, imposing a carbon tax in Washington State will affect the entire production and current economic conditions of the state. The businesses will move their operations to states with lower or no carbon tax. In the long run, the trade-off will fail to aid the economy. Shifting the company’s operations would also mean that a significant number of workers will lose their jobs, hence increasing unemployment in the state. Metivier, Postic, Alberola, and Vinnakota, (2017) argue that carbon tax remains one of the most important tools in government financing, but it also leads to shifts in production. Therefore, a carbon tax may not change the emission of carbon dioxide and other harmful gases to the atmosphere, but it will eventually change the fact of how and where such emissions happen.

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