Most of the time, we do not take into account the complete costs to producing or consuming a good or service. This is because we focus on the explicit costs. For example, if we were to bake a loaf of bread, we would take into account the cost of the flour, yeast, sugar, salt, water, milk, and butter. Perhaps we would even calculate our labor time to make the dough and the cost of running the oven, but would we account for the carbon dioxide dumped into the atmosphere for the delivery truck that delivered the baking supplies? How about the CO2 emissions from the power plant burning fossil fuels to generate the electricity to run the oven? The problem is that we are not required to bear the full cost of production. Some of the costs to bake that loaf of bread were shifted to society as a whole.
Even if we did not bake the loaf of bread ourselves, we’re still shifting costs to society as a whole just by consuming it. Our cars burn gasoline to drive to and from the grocery store, and regardless if we walked or biked, gasoline was likely also burned to deliver the bread to the grocery store in the first place. Sure the delivery truck paid for the gasoline, but many companies do not pay for the carbon emissions their operations generate.
We need to make some drastic changes to avoid the ills of climate change, which we are beginning to see affect our daily lives, but the logistics of transforming our world’s energy system can be intimidating. The first thing we need to do is get off fossil fuels and transition to renewable energy sources. Easier said than done, I know. It will be a complex and time-consuming process converting power plants, vehicles/transport systems, homes and commercial buildings. Unfortunately, time is not on our side here. We really need to reduce carbon emissions 80% by 2050.
So then the question becomes how can we transition the world’s energy infrastructure to sustainable sources by mid-century? One of the ways suggested is to implement a tax on CO2 emissions that begins low and gradually increases. There should be no mystery either about how much and at what intervals over time the tax will rise. Then people, businesses and governments can plan their fossil fuel exit strategy.
The revenues the carbon tax generates should be directed into subsidizing renewable energy innovation and overhauling energy infrastructure.
Ideally, the carbon tax should be global. Again there are logistical challenges to this climate change solution. The key is that we need a systematic and practical process. Isn’t it time we started taking responsibility for the full costs of production and consumption? Society is bearing the cost as a whole, and society as a whole needs to be part of the solution.