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Why Would Businesses Care?
If business just passes the carbon tax on to consumers, why would they care about an untax? If they didn’t care the untax would fail, because about half of the carbon savings needs to come from carbon reductions implemented by business.
The short answer is that the untax causes businesses to reduce emissions in exactly the same way as a carbon tax or a cap-and-trade policy. With each approach, business pays some type of carbon charge and then passes it on. OK, so they all work the same way, but just why do they work?
All of these policies work because of a disconnect that is just like the one between consumer refunds and the extra carbon costs paid by consumers. You get the same refund no matter what you pay for carbon, and businesses pass on the same amount to you no matter what they pay for carbon. So you want to reduce your carbon charges and make money on the refunds, and they want to reduce their carbon charges and make money on the pass through to you.
What confuses people is that business cannot pass through their own carbon costs, they can only pass through the average carbon cost in their industry. (That’s how markets work.) So if they cut their own costs to below average and pass through the average cost, they make money. If their own carbon costs are above average they lose money. Naturally they want to come out ahead of their competitors, so they do their best to cut their costs to below average. It’s a race to save carbon.
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http://zfacts.com/p/1027.html | 01/18/12 07:29 GMT
Modified: Fri, 27 Jun 2008 21:05:26 GMT
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