The Geonomic Approach to Climate Change

Frank deJong

[ GroundSwell, January-February 2010]

Climate change is again at the top of the global agenda, hopefully this time the nations of the world will take concerted action. But contrary to conventional thinking, dealing with climate change need not cost governments a penny.

Climate change can and should be addressed at zero cost to taxpayers by using the tax structure as a policy tool, i.e. tax shifting -- untaxing jobs and business and up-taxing resource use, land values and the privilege of polluting. Green tax shifts are revenue-neutral and cost governments nothing. In fact they benefit the economy by rewarding resource-efficient, clean production which is generally wealth-producing, value-added and job-intensive.

A revenue-neutral carbon levy would offset income taxes and still maintain the government income needed to fund services like healthcare and education, plus help reduce pollution-related healthcare costs and address climate change. Taxing carbon will encourage a greener economy by raising the cost of production of polluting industries by charging users a more accurate environmental cost and eliminating the deadweight loss of taxation on local, sustainable, labour-intensive, value-added production. The reduced income and sales taxes will decrease the cost of production in non-polluting industries; the new green-collar jobs replacing jobs lost in dirty sunset industries.

Carbon taxes, like all resource levies and land value taxes, don't damage the economy since they don't raise the overall cost of production. In fact, they are not taxes at all, but fees that collect only the economic rent that accrues to finite, non-replicatable assets -- unearned wealth that is generated by the community in the first place, and should thus return to the community (via the government) to finance services and infrastructure.

This policy program builds bridges between climate change skeptics and defenders, between business and eco-activists by offering a win-win, fiscally-responsible, politically-attractive market mechanism which addresses climate without additional taxes, unfair subsidies or punitive compliance legislation. This program makes sense for both rich and poor countries regardless of the real or perceived climate change treat and would avoid the need for future international climate change agreements, the intrinsic rewards being sufficient.