Carbon taxes and credits are tools to correct our economic systems and prices so that they more accurately reflect the reality of our finite planet.

Our current pricing system does not take into account the way that our business and industries affect the water, soil, plant and animal life, and the biosphere, which supports all life on Earth. When prices are set by buyers and sellers, the market just assumes that we have unlimited resources that we can draw on to expand. This is because up until very recently, economists did not imagine that we would become so populous that our industrial systems would put a real stress on the planet’s resources.

The pricing and taxing system we have inherited does not reflect the value of nature’s services, which are the basis for all the goods and services that we use and trade. Pollution results in higher health costs for people, but the polluters don’t have to pay for it. Overfishing results in depleted fisheries that will not renew themselves for centuries, but the corporate fish companies that overfish don’t have to pay the price for that. The word for these costs, that corporate polluters don’t have to carry, is “externalities”, because they are external to the company, and the system that they do business in.

Greenhouse gas pollutants like carbon dioxide threaten to overheat our planet to the point that we will lose billions of dollars from a variety of impacts. One example is the cost of agriculture from drought. Another example is the billions of health care dollars we will pay from increased disease associated with warmer temperatures.

In order to “internalize” the externalities of carbon costs, and reflect the true cost of our industrial and commercial activities, a premium in the form of a carbon tax or carbon credit can be added by governments and international organizations, to goods and services that we buy or sell, or to income that people and companies derive from activities that are carbon intensive.

This means that pollution is made more expensive for everybody, which is as it should be, because pollution IS expensive. When people and companies are given an incentive to choose suppliers and means of production that are less carbon-intensive, we end up with a system that includes environmental costs, a system that makes more sense and reflects our dependence on our earth’s natural systems.

- Kate Holloway

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