How can we reduce greenhouse gases without intrusive government regulations? Economists have long advocated taxing carbon dioxide emissions, and a new study by British researchers suggests the approach can actually work.
The reduced emissions had no significant impact on employment, revenue, or overall productivity.
In 2001, the U.K. government introduced a new carbon tax amounting to 15 percent of a manufacturing plant’s energy bill. The legislation also, importantly, included a less onerous option under which facilities in certain energy-intensive industries would have the tax reduced by 80 percent in return for adopting “a specific target for energy consumption or carbon emissions.”
A research team led by Ralf Martin of Imperial College London examined energy usage at U.K. plants over the first three years of the plan, and found far greater reductions in electricity use and carbon dioxide emissions among those that were taxed at the higher rate. What’s more, the reduced emissions had no significant impact on employment, revenue, or overall productivity.
When it comes to cutting greenhouse gases, this study strongly suggests taxes are more effective than targets.
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