Preoccupation with Covid-19, exam results and the impending doom that is called Brexit can easily marginalise the biggest threat we have in the foreseeable future which is climate change. It is not enough to recycle more plastics or to encourage people to buy overpriced electric vehicles. The only thing that works is to make everybody pay properly every time they consume any goods with a significant carbon input. Fortunately we already have a very simple system that we know and works to account for VAT. That can be easily duplicated to account for carbon consumption.
Efforts to reduce worldwide carbon consumption has been at best patchy. Carbon dioxide emission continues to rise at ever faster rates. Attempts to persuade people to cut down their consumption have simply not worked even in Western countries. For many, there is a high-level of engagement with the problems of climate change and the essential need to do something about it. Many of the current procedures such as carbon trading are completely out of date and essentially ineffective at making any significant difference.
Begging people to use less carbon when so much of what we consume is hidden will simply not work. What is needed is a simple and radical approach to carbon accounting that covers every aspect of carbon consumption. It must also allow a hard cash value to be attributed to every use of any non-renewable energy source. Sadly the reality is that only by making people pay for their use of carbon can be reduced. It is one of the few advantages of our capitalist system!
There is an urgent need for an effective and efficient carbon accounting system. We already have a very efficient system for accounting for Value-Added Tax (VAT). Every organisation has inputs and outputs, each of which may or may not have VAT attributed to them. Every organisation is perfectly familiar with that system. Equivalent systems are used in almost every country of the world. A very elementary approach to carbon accounting is simply by doing the same thing but for carbon.
We can use a standard unit of carbon such as the equivalent of burning 1 kg of methane. Every input must have the amount of carbon used in generating that input stated, and every output similarly labelled. Input sources that do not currently account for carbon might have an attributed amount equivalent to the current industry standard +50%. Every account passed by auditors must have a statement affirming that carbon has been properly accounted for and that all carbon inputs are balanced by carbon outputs. Ultimately the end user or consumer of the output has visibility of the carbon that went into it.
Getting the system going can be done relatively quickly. Eventually governments can attribute a cost to the carbon which has to be paid for by the end user or, if an organisation decides to pay for part or all of the carbon it consumes this will add to the output cost of the goods. This might apply to goods sent overseas to an environment where carbon is not properly accounted for. Such exports would lead to an export carbon tariff.
Power generators would produce renewable energy that would be accounted for with a negative carbon content. Governments can also decide that goods which can lead to excessive carbon consumption (such as gas guzzling ultra expensive vehicles where the owners are unlikely to be bothered about their carbon consumption) should be heavily taxed by using a higher rate for charging carbon very much like a luxury rate might be imposed for VAT on such goods.
The advantage of this approach is it is highly compatible with current worldwide accounting procedures and doesn’t require anything new to be created. All carbon coming into an organisation is accounted for in exactly the same way as is the cash and the VAT. Similarly everything leaving an organisation is accounted in familiar ways. As with VAT rates, the cash equivalent of carbon would be set nationally although within a narrow range by international agreement. Naturally, we have to deal with it carbon equivalent of managing tax havens to ensure that there are substantial limits on the transfer of carbon debt outside any legislative area. This is being addressed, albeit very slowly, with multinational internal transfers between regions and it must be addressed in exactly the same way with carbon burdens.
No overt attempt needs to be made to reduce carbon usage but simply rely on the fact that it can be made very expensive for the consumer when excess carbon as required to generate a product. This would lead to improvements in manufacturing methods and efficiencies, choice and quantity of packaging and every other aspect of the goods output from an organisation. In organisations where the outputs are, for example, consultancy then each output invoice would have attributed to it a proportion of the input carbon used by the organisation.
We have a lot of experience with managing all the details of accounting for VAT. Surely it must be sensible to build on that experience to create an efficient carbon accounting tax.
