On the collection of carbon tax

On the collection of carbon tax

Carbon tax is collected on the production side, not on the consumption side. It is collected on material, not on salary and dividend. What are the impacts of such a policy?

We might start analysing the problem in the simplest possible situation. Suppose in a two person world: one worker, one carbon tax collector. The worker does all the work producing a consumption commodity. The tax collector charges 80% of the total revenue as carbon tax.  The worker can only afford to consume 20% of the commodity, while receiving 100% of the blame for damaging the environment. The tax collector consumes 80% of the commodity while receiving 100% of the accolade for saving the environment.

Eliminate the carbon tax collector.  It will reduce 80% of carbon emission without affecting the lives of the rest of the world.

We will look at two companies A and B, both with one million dollar annual expense. Company A spend 90% on material, 10% on salary. Company B spend 10% on material, 90% on salary. Company A pays a lot of carbon tax. Company B, on the other hand, receives carbon credit. But staff from company B consume large amount of final product due to their large salary and hence spending power. 

Look around. It is the carbon tax collectors and carbon credit recipients who enjoy the most extravagant lifestyles.