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Carbon Taxes Run into Hot H2O

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December 31, 2009

Not only is the U.S. Senate leery of passing a carbon tax, but apparently the idea is also running aground in both France and the state of Minnesota.

The French Constitutional Council has said non to a proposed tax on carbon emissions that French President Nicolas Sarkozy had advocated. The council evaluates the constitutionality of proposed laws and it ruled Tuesday that the law as it is currently drafted provides too many exemptions for polluters and thus unfairly taxes other businesses, according to The New York Times. The council complained that about 93 percent of industrial emissions would be exempt from the tax. The Economy Minister plans to redraft the law to close some of those loopholes, according to Reuters.

Back home in the U.S., the House of Representatives managed to pass climate change legislation in June, including cap-and-trade rules that would set up an emissions-trading scheme in which companies could buy and sell carbon offsets to meet their required emissions reductions. However, the legislation has not been taken up yet by the Senate, and the prospects for the cap-and-trade part of the bill appear to be murky when the Senate resumes work on the bill next year, especially with opponents labeling the idea as “cap-and-tax.”

Minnesota has proposed a carbon tax, but its neighbor, North Dakota, or specifically North Dakota Attorney General Wayne Stenehjem, has threatened to file suit to block the proposed rules. He believes the rules would make it more expensive for utilities to use coal-generated electricity produced in the western region of his state, according to the Associated Press, and he argues the rules would violate constitutional restrictions on one state regulating another state's business.

Back in Europe, an emissions trading system has been in operation since 2005 and requires big polluters to hold a certain quota of permits in order to emit greenhouse gases. If they go above their quota, they have to buy additional permits. However, efforts to expand emissions trading across the globe went practically nowhere at the Copenhagen climate change summit earlier this month, as developed and developing countries nearly came to blows over emissions limits.

In any case, the value of carbon credits has been declining lately, especially amid disappointment over the failure to reach an agreement in Copenhagen. Meanwhile, recent reports have indicated that European taxpayers have lost over $7 billion to fraud in carbon credit trading scams in the past 18 months, according to CBC News.

Clearly there needs to be a better solution than carbon taxes, which allow polluters to just pollute more, encourage governments to award billions of dollars worth of emissions credits to polluters, and enable scammers to commit billions of dollars worth of fraud.

Let's hope someone comes up with a better idea in the New Year.

Comments (2)
There is a higher standard than the Cap and Trade which is far less expensive. This standard is simply the standard of resource stewardship which state that what you consume must be replaced with like or increase vaule. So if you are producing CO2 into the atmosphere and you consider that a negative, you need a positve to create value - which would be more forest area. See - no taxes, no tax administration and compliance, no false markets.
Posted by ulm72 | Monday, January 04 2010 at 11:26AM ET
There is a higher standard than the Cap and Trade which is far less expensive. This standard is simply the standard of resource stewardship which state that what you consume must be replaced with like or increase vaule. So if you are producing CO2 into the atmosphere and you consider that a negative, you need a positve to create value - which would be more forest area. See - no taxes, no tax administration and compliance, no false markets.
Posted by ulm72 | Monday, January 04 2010 at 11:26AM ET
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