Why don’t governments fund initiatives like Carbon Capture Technology through taxes?

There are three parts to this question. The first one relates to the role of government, as opposed to the role of private sector in reducing carbon emissions and carbon dioxide concentrations in the atmosphere. The second part relates to role of Carbon Capture Technology, and indeed how we define this technology. The third part is the role of taxes in funding government initiatives.

Governments, such as the Australian Government, have an important role in providing public goods, such as a safe climate. They can support the provision of this public good by working with the private sector in helping them reduce carbon emissions at source (i.e. where they are emitted, such as through ‘smoke stacks’). Government assistance can take the form of public funding to develop new technologies to capture carbon at source, or to reduce carbon dioxide concentrations in the atmosphere, such as through reforestation and wetland regeneration.

This leads to the second part of my response, involving Carbon Capture Technology. Can this ‘technology’ involve activities such as reforestation and wetland regeneration? I work on wetland restoration projects that are funded by the Australian Government specifically to reduce carbon dioxide concentrations in the atmosphere. Wetlands do this by removing atmospheric carbon and storing it safely in their soils and lifeforms as ‘blue carbon’. Investing in these so called ‘nature-based solutions to climate change’ has the added benefits of conserving our biodiversity, and supporting food webs that in turn benefit fisheries.    

But does the Australian Government need taxes in order to fund these initiatives, whether they involve smoke stacks or salt marshes? We know the answer is ‘no’ from the COVID19 experience from 2020, where the Australian Government did not need to tax us in order to fund their responses to the pandemic. Taxes have a number of functions in Australia, but we do not need to tax before we can spend/fund. If the Australian Government wants to fund climate change responses, the limiting factor is not taxes, but a combination of political will and imagination (if you like, ‘thinking outside the tax’).