WP2RD930S22

In 2021, the Dixie Fire, the largest single wildfire in Nevada state history, burned nearly 1 million acres. Glaciers melted and polar bear populations lost 10% in genetic diversity over the last 20 years. Extreme and unusually cold weather at Jharkhand, India killed the crops in the harvest season. Our Earth is dying, because of climate changes, that humans are primarily responsible for. A change is urgently needed. The next question is, how? Living under the current trend of globalization and within capitalist markets, how are we able to change? Some argue that the nature of global capitalism with a desire to collect wealth makes it impossible to solve climate change. However, I believe in its possibility through implementing carbon tax policies, because it takes advantage of that profit-maximizing nature and uses monetary incentives to urge society to start a greener business cycle.

Thinking about how much more money and time innovating for green production or living a life with only environmentally friendly products take, people with capitalist ideology are reluctant to change the current polluting lifestyle. The firms, representing the supply side of the market, are profit-oriented. It is the nature of capitalism, that private owners can control resources and act for their own good. In most cases, why would one work hard to manufacture for inventory, deliver products, manage relationships with customers, battle with competitors, etc.? For money. Trying to change the current polluting production costs money. From a profit-maximizing perspective, no one wants to shift the current polluting production. Similarly, from the demand side, given limited budgets, most people want cheaper goods. If firms spend more costs to innovate, they often price higher — and customers don’t want that. As suppliers and consumers are closely-related, with money-oriented minds, none of them are reluctant to pay for innovation, just for environmental protection. Therefore, it seems impossible for globalized capitalism to solve climate change.

However, the carbon tax policies — adopting monetary rewards and penalties — utilize firms’ pursuits of profit and push them to innovate for green technology. If firms pollute, they have to pay a large amount of tax money, which harms their gains. If they develop environmentally friendly manufacturing processes, they could get tax exemption, which is beneficial. Therefore, under carbon tax policies, firms are more motivated to stop pollution. For example, since 2008, the Canadian province of British Columbia started a revenue-neutral carbon tax policy on fossil fuels, which returns all its benefits through “reductions to personal income tax, corporate income tax, and property tax”. BC government collected money from those polluted and financially supported those that didn’t. Positive outcomes in both environmental and financial aspects are brought by such policy. Based on the Pembina Institute studies, we see — “per capita fossil fuel use declined by 16.1% from 2008 through 2013 … [while] B.C.’s per capita GDP has slightly outpaced the rest of Canada’s, growing by 1.75% versus 1.28%”. A drop in pollutive fuels used means a higher chance of environmental protection. What capitalistic market worries — the profits and GDP growth — are also not negatively affected because B.C. grows more than the rest of its country. Therefore, a carbon tax policy is a win-win solution. As companies manufacturing and selling goods and services make up an important part of our daily life, when they are bound by this environmentally-friendly policy, we are more likely to solve the climate change problem.

Moreover, by rewarding individuals for buying environmentally friendly products, carbon tax policy attracts consumers to live a greener life, and these demands can ultimately impact firms as suppliers. Following up the discussion above, the tax/fines collected from polluting firms can also be rewarded to customers who buy eco-friendly products. This policy fulfills the consumers’ monetary pursuits and urges them to live green. It is true that from a psychological perspective, intrinsic incentives have better and long-lasting impacts than extrinsic incentives, which in our case would be planting a mindset in oneself to buy eco-friendly products without any outside praises is better than monetary rewards. However, intrinsic incentives take time and require people’s self-awareness. As our environment is devasting, extrinsic incentives motivate people and inspire changes immediately. When more people want to purchase environmentally friendly products, firms will switch to producing those — which ultimately change the current polluting business cycle and solve climate changes. Therefore, carbon tax policies are helpful to solve climate change by impacting the demand side.

We do have to admit that carbon tax policy is not perfect because it could not change our inherent defects — firms’ technological innovation and exploration for green energy cannot keep pace with our urgent needs for them to solve climate change. Even if firms immediately react to our policy by stopping pollutive manufacturing and innovating for green technology, they need a significant amount of time to actually achieve results. This is understandable because research and development are hard. The problem is, under the worsening climate changes, what we are lack is time. As Larry Elliott discussed in his article, along with Stern’s perspective, “all the major car-makers now accept that the era of the internal combustion engine is coming to an end … but the speed of action is still far too slow”, therefore “fossil fuels will still account for more than 50% of energy consumption by 2050”. How the car-making industry improves represents how people see the urgency to stop burning fossil fuels and begin to try more environmentally friendly energy. This aligns with what we want to be the impact of carbon tax policies — making firms innovate. However, the data followed shows that we still largely depend on polluting input like fossil fuels in our production in the next 30 years, which means that our development for new green energy is far too slow. We have already had a temperature rise per decade in the past 30 years (0.18 degree C) twice as much as it was since 1880, which already brings severe storms, increased droughts, loss of species, etc. For another 30 years burning fossil fuels as we do now, who knows how detrimental our living conditions would be. Therefore, Elliott and Stern correctly identify a detrimental problem that carbon tax could not solve. However, does this mean that our carbon tax policy is worthless? No. The policy is the first step, initiating the movement for companies and individuals to protect our Earth. Without the policy, people don’t even try to produce or consume green, which is even worse. The problem of exploring new energy too slow is our realization of our inability during the movement. Knowing that we aren’t capable of dealing with the urgent climate change problem with ease, we are inspired to prioritize it more and put in more effort — maybe adjusting our needs and stopping the most pollutive sections first.

While some people believe that the desire for profit makes people under global capitalism unable to solve climate change, carbon tax policies utilize such desire and use monetary rewards and fines to urge the society — both consumers and suppliers — for a more environmentally friendly business cycle. Once firms are pushed to innovate production and people are into buying green products, even if we are not able to achieve cheerful results immediately, at least we start. Step by step, we will solve climate change and make our Earth a better place as it used to be.