June 4, 2008
The high oil prices of 2008 have lead to a similar historical result as in the 1970s: the notorious oil-burner Americans cut back on their carbon-dioxide emission habits. I think this shows that the main source of carbon emission, namely fossil fuels, is price and income sensitive, and if you raise the price, consumption and emission will fall. Correcting the market with a carbon tax will surely reduce emission.
Many observers have pointed out that Europeans have lower carbon-dioxide footprints because they drive less, and drive significantly smaller cars. This is not just a good habit, this is the cause of very high taxes on European fuel, which does not let ordinary Europeans to burn any amount of gasoline. Now that oil prices have soared in America in such a significant way that families start to feel it, the American people responded like Europeans: sale of gas-guzzlers is down, they cut back on oil consumption, and mass transit use is on a 50-year high level.
Kenneth Rogoff, the eminent former chief economist of IMF and a professor at Harvard makes a good argument in the January issue of Foreign Policy that correcting the price of fossil fuels, such as imposing a high VAT on fuels as a carbon tax is a much better solution to curb carbon emissions than the European ETS system. I think this argument has got several empirical underpinning since the publication of the interview: the response of Americans to the rising fuel prices and the confession of the European Commission that carbon-dioxide emission is actually rising under the EU regime are compelling cases for taxation.
Link: Blogactiv has an excellent Energy&Climate blog.Author : Dániel Antal