'Carbon tax' would help Iowa, planet

Six years ago, the Canadian province of British Columbia decided to go it alone in fighting climate change. It imposed a tax on fossil fuels — coal, gasoline, diesel fuel, propane and natural gas.

By most accounts, the "carbon tax" has been a success. It made fossil fuels more expensive, so British Columbians began to conserve them and use them more efficiently. Revenue from the carbon tax allows other taxes to be reduced, so the province enjoys the lowest personal income tax rates in Canada and some of the lowest corporate taxes in the developed world.

Contrary to fears, the carbon tax did not cause the economy of the province to collapse. Economic growth is slightly better than in the rest of Canada, and the forward-looking energy policy gives British Columbia a reputation as a world leader in green entrepreneurship.

Why can't Iowa be like that?

Indeed, Iowa should be like that, and circumstances might be right for Iowa to become the first American state to employ a full-fledged carbon tax.

Iowa and other states already have partial carbon taxes. We pay them at the pump when we buy gasoline or diesel fuel.

In Iowa, all gasoline and diesel fuel tax revenue is earmarked for highway construction, maintenance and administration. Paying the gas tax is how motorists pay for the bridges and highways.

After the November election, when candidates are no longer afraid to talk about taxes, a consensus will probably develop to raise Iowa's motor fuel taxes. The current gasoline tax of 21 cents per gallon (19 cents for ethanol blend) and diesel tax of 22.5 cents bring in about $450 million but leave the state an estimated $215 million short of what's needed for highways every year.

Closing that gap would require raising motor fuel taxes by about 10 cents per gallon.

Instead, why not abolish motor fuel taxes and replace them with a carbon tax?

A carbon tax would apply to all fossil fuels, not just gasoline and diesel fuel. The tax on each fuel would be based on its carbon content. Carbon-dense coal would be taxed more heavily than relatively carbon-light natural gas.

The carbon tax on gasoline and diesel fuel could be calibrated to bring in about the same amount of revenue as the existing motor fuel tax. Additional revenue to close the highway-funding gap could come from the carbon tax paid on coal and natural gas used to generate electricity. This would be a way for electric car owners to begin paying their share of highway maintenance.

Electric cars contribute less for highway maintenance than gasoline- or diesel-burning vehicles. (Electric cars don't pay gasoline tax, but they do pay license fees and use taxes.) In the future, if electric vehicles become ubiquitous, it will be essential to have some source of highway money beyond the gasoline tax. Having a carbon tax would put Iowa ahead of the game of paying for roads in an electric-car future.

Additional revenue from a carbon tax, beyond that needed for roads, could be used to lower other taxes, as in British Columbia. Since the biggest burden of a carbon tax would fall on low-income people, reductions or credits for low-income people should be the first priority. Lowering for abolishing the corporation tax, as an incentive for businesses to locate in Iowa, might be the second choice.

The idea of a carbon tax is to use market forces to reduce the amount of carbon dioxide spewed into the atmosphere when fossil fuels are burned. Economists use the term carbon pricing. When the price of something goes up, people use less of it. A carbon tax is intended to raise the price of fossil fuels enough to discourage consumption as well as to create an incentive to find alternatives.

As a leader in biofuels and wind turbines, Iowa should be for anything that incentivizes the switch to alternatives.

Perhaps Iowans should even be cheering for a carbon tax to be imposed nationally, because, among the states, Iowa may be one of the best positioned to benefit from it.

Of course, a national carbon tax is off the table as long as Congress is full of climate-change deniers who are beholden to the fossil-fuel industries. But, outside of Congress, the carbon tax and other carbon-dioxide-reducing strategies appear to be gaining credibility.

A number of major corporations, banks and institutions have begun to question the conventional thinking that the economy would suffer if carbon dioxide emissions were curbed. Most recently, the Global Commission on the Economy and Climate, a group of heavyweight international leaders and economists, issued a report showing that reducing carbon emissions would cost the economy very little and might actually stimulate economic growth. Other research published by the International Monetary Fund suggests that carbon taxes, rather than being a drag on an economy, can be a benefit.

It also appears that cutting carbon emissions can help a country's economy even if other countries don't go along. British Columbia has shown that a state can go it alone without other states.

Nationally, the United States is waiting around for some big international agreement that will require all countries to reduce their emissions in unison. That shouldn't be necessary. The United States could take the lead by acting on its own, watch its economy grow, and let the rest of the world catch up.

In the process, the United States would gain mastery of the sustainable-energy technology that will drive economic growth in the future.

Sadly, the odds of the president and Congress acting that boldly on climate change are roughly nil. But maybe the little state of Iowa, out here in the heart of America, could nudge the nation in the right direction by setting an example on its own.

Richard Doak is the retired editor of the Register's opinion pages.