The affect of greenhouse gas emissions or carbon emissions policies is a huge topic for governments around the world right now. Here in my province a new "carbon tax" was recently introduced. We will soon be paying $10/tonne of carbon dioxide emissions on all fossil fuels; this amount will increase over time. The tax is equivalent to about a 2.5 cent/litre increase in gasoline. The tax is designed, of course, to make consumers think more about our carbon emissions and, through monetary incentive, start making positive changes to reduce these emissions. The tax applies to all individuals and business, include aircraft and large shipping vessels, although there are a few exceptions.
The new carbon tax is targeting one facet of carbon emissions, namely fossil fuel emissions. Despite the fact that BC is a leader in introducing this tax, we still have a long way to go. For example, on Vancouver Island forestry companies are still allowed to clearcut old growth forests. I believe that the scientific evidence is clear that old growth forests act as large pools of carbon storage (in the trees, in the soil). Clearcutting these forests releases an enormous amount of carbon into the atmosphere, and the newly planted forests will not reach the same carbon storage capacity for hundreds of years. Unfortunately, when it comes to big business, which forestry is, our government appears reluctant to make significant changes, fearing dramatic consequences to our economy, especially in these unstable times.
As these new governmental policies come into effect, there certainly are more and more questions on how policy will affect the economy. In the US, a nice interactive website called See For Yourself has been set up so that individuals can go in and rate the likelihood of each of a set of 7 assumptions, directly related to potential future policies, and see the impact on GDP. I went in and tried, and even with some skepticism on whether or not people will actually make some of the needed changes, there was a positive impact on GDP by 2030.
Keep in mind though, GDP is just one measure of economic prosperity. For a brief overview on GDP and how it measures wealth, read this blog entry from Mariam at Money Relations.
