Alternative Energy Business

Alternative Energy Business presents the following information on how a "Carbon Tax" could impact a business.   Taxes have become a hot button issue, particularly for many of us that live and do business in California.  Many consumers and small business people hear the word "tax" and instinctively cringe!  However, there are taxes that simply gather revenue, and there are taxes that are structured to gather revenue, but at the same time encourage consumers and businesses alike to rethink their current way of operating and encourage them to work and act differently.  This is the theory behind a Carbon Tax. 

Governments around the world are hopping on the band wagon and taking a position on pollution and other related environmental issues caused by fossil fuel emissions. In fact, many governments have gone as far as to implement various measures to reduce carbon dioxide pollution. One popular initiative that the United States government is supporting is a carbon tax. However, be forewarned: There are pros and cons to every initiative. A carbon tax is no different.

What Is a Carbon Tax? A carbon tax is a direct tax levied on a business that emits carbon dioxide, a natural byproduct that is generated as combustion of fossil fuel. In effect, it’s a pollution tax that is intended to penalize those businesses that are the greatest offenders of carbon dioxide emissions. Government imposes a carbon tax on a business by measuring the amount of fossil fuels it uses. The business is then taxed according to the amount of usage.

Proponents of a carbon tax stress that a carbon tax will encourage businesses to think about changing their modus operandi and seriously consider adopting alternative fuels. They stress the two-fold benefit accrued to businesses who adopt this view. (1) They will pay a lower carbon tax; (2) They will project a positive public image, as more and more consumers begin to align themselves with companies that are taking measures to reduce their carbon footprint. Seen in this way, a carbon tax gives businesses a choice: They can continue to use fossil fuels and pay higher taxes; or they can reduce their carbon emissions, pay lower taxes, and ultimately benefit from its "good citizen stature" in the marketplace. To paraphrase the MasterCard commercial: The cost of PR (in this case) may be priceless!

Proponents also point to a positive trend that may result from a carbon tax. Historically, when a product or a service becomes expensive, consumers are inclined to adopt alternative methods that are more affordable or that have a more positive effect on them. This logic applies to fossil fuels. When fossil fuel emissions are heavily taxed, businesses will begin to consider alternate energy sources that are both less expensive and less harmful to the environment. This trend is already taking hold. And many governments plan to accelerate the trend by levying a hefty tax on carbon polluters.

Carbon tax opponents argue that such a tax is creating a "damned-if-we-do and damned-if-we-don’t" dilemma for some businesses, if not for whole industries. The dilemma goes like this: If businesses must stay the course and continue to emit carbon dioxide, they will be socked with a carbon tax. If they decide to adopt alternative, green fuel sources, they most likely will have to invest in new products, services, and operations that are dependent on green fuels. For some businesses, the capital investment to retrofit their operations may be prohibitive, at least more prohibitive than incurring a carbon tax. All things being equal, businesses in this predicament may rationalize that paying the high carbon tax is worth it considering the alternative – making huge capital investments and/or laying off a huge part of their workforce.

Opponents of this tax expand this argument to less developed countries, which may be the greatest carbon dioxide offenders. They argue that the United States government is only fooling itself when it considers transferring carbon tax benefits or payments to third-world countries, because these countries are much less concerned than Americans about actually complying with carbon rules and regulations. Speaking of governments, carbon-tax opponents also make the point that governments (including the United States) are not doing enough to educate businesses on how they can adopt affordable measures to avoid or reduce the carbon tax.

Carbon-tax opponents also assert that the tax is a way for politicians and their governments to get more money for causes their lobbyists support instead of doing what is best for the country as a whole (read:. tax deductions for plaintiff attorneys). They also point out that until affordable measures are created for alternative energy, it’s unfair to impose a tax on businesses that pollute. To this point, they question the underlying motive of a government that benefits from levying high taxes on businesses that are not in a position to adopt renewable energy any time soon: They claim that if governments were sincere about the environment, they would be willing to subsidize alternative sources of energy until the technology and scale of application result in lower prices. Instead, they argue that governments are exploiting the situation, if not deliberately benefiting from the tax.

Today’s United States congressional leadership favors a greener world through carbon taxes and higher regulations, many of which are untested and laden with political pork. How this carbon tax is enforced will definitely create winners and losers. In the end, the carbon tax debate points to the urgency for businesses to plan NOW for the "inevitability" of a greener world, which will undoubtedly have an impact on rising energy, transportation, and regulatory costs.

Author: Gary W Patterson

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