Is a Carbon Tax in Your Future?
Actually, you may already be paying it.
There has been a lot of talk in the United States lately about instituting some sort of financial scheme intended to reduce carbon emissions, but given the state of our national politics, nothing has actually been accomplished and nothing appears on the immediate horizon. Depending on where you fall on the tree-hugger/government-is-evil spectrum, this could be either good or bad, but whatever your politics, if you are a boater and don’t spend all of your time aboard sipping martinis while tied to the dock, you are a large carbon emitter and any such program will have an impact on you. That is, it will cost you.
Every time there is a major climatic event, the discussion of such a scheme regenerates, and a lot of so-called experts firmly believe it is only a matter of time before the United States implements some form of financial “incentive” (tax) to inhibit the public’s thirst for carbon-based fuels. This could take the form of a direct tax on all carbon-based fuels or some sort of emissions-trading scheme in which carbon emissions produced by large polluters (i.e. electrical generating plants, large manufacturers, etc.) would be capped. Those who exceed such a cap would either have to pay a fine or purchase credits from those whose emissions fell below the cap.
Whether it be a direct carbon tax or an emissions-trading scheme, if it comes to America we will hardly be alone. At present, a whole host of countries have some form of carbon tax, including Japan, Finland, the Netherlands, Norway, Denmark, Switzerland, Costa Rica, South Africa, Australia, and New Zealand.
If a carbon tax happens here, get your wallets out. How much you’ll owe, of course, depends on how large the tax is, how it’s structured, and how it’s levied. For instance, in 2010 Ireland instituted a direct tax on oil and gas that amounts to roughly 43 euros per 1,000 liters (about $58 per 264 gallons). Costa Rica’s tax, which passed in 1997, amounts to 3.7 percent of the market value of fuel.
It might seem at this point that if you end up in a country that doesn’t have a direct tax but instead has a carbon-trading scheme, you’re going to be able to avoid paying extra when you fill your tanks. The true financial impact of carbon trading is a matter of controversy, but most economists believe that there is a trickle-down effect—that carbon-intensive industries such as petroleum extraction and refining end up shouldering more costs, be they associated with meeting stricter emissions standards or paying fines for failing to do so. Bottom line: If you travel to, say, British Columbia or Québec and take on fuel, you’re most likely paying more to help fund their carbon-trading scheme.
Australia has a lot in common with the United States, and while its government tends to be more liberal, examining its carbon-tax structure might provide a hint of what’s in store for us if we go down this road. According to Inchcape Shipping Services (ISS), a maritime-based service provider with offices in 65 countries, Australians currently pay both a bunker-oil duty and a carbon tax “for all vessels who conduct a coastal voyage within Australian waters, and if a vessel purchases fuel and or oil within Australian waters for the purpose of a coastal voyage.” This policy was implemented in July 2012 and is supposed to affect the 500 largest polluters, yet according to ISS, the government is currently collecting about 6.5 cents (Australian) per liter before rebates. Note that this policy applies principally to large commercial vessels using bunker fuel, not to your typical Aussie pleasureboat.
But the real question is whether a carbon tax is really coming to a fuel dock near you. I spoke to a number of congressional aides as part of my research for this story—about half Republican and half Democrat. None would agree to be quoted, but by a two-to-one margin all said that some form of a carbon-reduction scheme is inevitable—especially if we experience more catastrophic weather events. Consensus is that a U.S. version would most likely focus on the trading of carbon credits, not a direct tax on carbon-based fuels. (The Australian carbon tax is slated to eventually become a carbon-trading scheme.) So you probably won’t see a major spike in fuel-dock prices when the program finally goes into effect, but that doesn’t mean it won’t cost you. According to World News Australia, the Australian government has estimated that as a result of its carbon tax, an Aussie’s average weekly household expenditure has risen by around $9.90, including $3.30 per week on the average electricity bill and $1.50 per week on the average gas bill. (All amounts are in Australian dollars.)
Proving once again that it’s not easy—or cheap—being green.
This article originally appeared in the August 2013 issue of Power & Motoryacht magazine.