Carbon Tax: The Moral Decision

In a world that is warming faster than expected, a carbon tax is an incentive that would benefit us even if the money were thrown into the sea. Despite the compromises, this is necessary legislation. opinion

Prof. Eitan Shishinsky, Angle - Science and Environment News Agency

Carbon tax. Illustration: depositphotos.com
Carbon tax. Illustration: depositphotos.com

2023 was The hottest year ever recorded, and 2024 is expected to break the record. Last summer was the hottest summer since measurements began, they In Israel And they are in the northern hemisphere. Worse, the rate of global warming is faster than expected. heat waves, Fires, storms, the melting of the ice in the arctic sea, the rise of the sea level, the increase in the acidity of the oceans, the spread of diseases, and more, causes worldwide water shortages, the flooding of large areas and the displacement of populations. Most of the damage is expected in the future - especially here in Israel, being in an area whose vulnerability to the climate crisis is relatively high.

There is a temperature, unknown, from which the damage to the earth will be catastrophic and irreversible. The scientific consensus is that the average temperature should not rise more than 2 degrees Celsius above that of the era before the industrial revolution. Now we are close for an increase of 1.5 degrees Celsius, a goal that until recently was expected to be reached only in 2050. To take part in the global fight against the climate crisis, the carbon tax that is expected to enter into force in 2025 is necessary, even if it involves compromises.

About 3,600 American economists (including 28 Nobel laureates) signed a statement that a carbon tax is the cheapest way to reduce greenhouse gas emissions. Photo: pixabay

Not a voluntary act

There is no point in reducing emissions of greenhouse gases in some countries while in other countries carbon dioxide continues to be emitted in huge volumes, since the greenhouse gases immediately rise into the atmosphere and have a global effect. At the Paris 2015 conference The countries of the world have reached agreements regarding targets for reducing greenhouse gas emissions. Israel also committed to this, but so far has done very little. This is not a voluntary act. Countries that do not cooperate are expected to be punished through restrictions and tariffs on trade with them.

About 3,600 American economists (including 28 Nobel laureates) signed a statement that a carbon tax is the cheapest way to reduce greenhouse gas emissions, and that the price of carbon should be raised every year until greenhouse gas emissions are completely reset. Although the taxation is called a carbon tax, it refers to all the greenhouse gases that are emitted during the production of energy from burning fossil fuels. On top of that, all the international economic bodies (the IMF, the World Bank and the OECD) recommended the adoption of this tax. This is also the recommendation of A committee appointed by the Israeli National Academy of Sciences on the subject, as published in the journal 'Ecology and Environment'. The imposition of a carbon tax was promoted by the Lapid-Bennett government in the 2021 budget, but was blocked by the Netanyahu government upon its formation. The Ministry of Finance promoted the imposition of a carbon tax as part of the budget bill, and the carbon tax decree was approved in the plenary session of the Knesset.

Behavior change tax

The carbon tax is intended to increase the cost of energy in the process of consumption of which greenhouse gases are emitted, and therefore to reduce relatively the price of energy from renewable sources (green energy). This should encourage a transition to green energy production and energy savings in general. This is a tax intended to change behavior, not to finance public goods (such as security) or to promote distributive justice (such as transfer payments). This kind of tax is called a Pigovian tax.

The beauty of such a tax is that the tax collected can be returned to the public. In fact, the tax will provide an incentive for the desired change in behavior even if we throw the collected money into the sea. Of course it's a shame to do so. The tax will achieve its purpose as long as we return the money to the public in a way that does not depend on the question of how much tax each of us paid. To explain this, let's assume that the tax will result in the collection of a billion NIS. If we divide this tax equitably among the residents of Israel, the resident's behavior will still be properly affected by the carbon tax since he will want to minimize the tax he will pay. It is also possible not to return the money to the residents, but to reduce the rate of other taxes, such as VAT. It is also possible to take the money and use it to finance the state budget which is in deficit.

Three groups came with demands to those responsible for the legislation. One is the energy producers who claimed that the tax would lead to their collapse and asked for financial support for the transition period. The second group that also demanded compensation is that of members of the Knesset who took care of households with little income - not only the weakest but also the middle class, for whom the rising cost of energy will make it very difficult. The third group consists of the environmental organizations that demanded that the income from the tax be directed to encouraging renewable energy and that were not satisfied with indirect encouragement by raising the price of competing energy.  

These are understandable and fair demands, but without this tax, Israel will violate its obligations to the world. Without it, it is likely to be punished in the future, and will behave immorally as a country that refuses to contribute its fair share to a global struggle that also protects it.

Prof. Eitan Shashinsky, Steering Committee for Dealing with the Climate Crisis, Israel National Academy of Sciences; The Bogan Family Department of Economics, The Hebrew University of Jerusalem

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