A Call for a Carbon Tax From Elon Musk...and Many Others

[Raffy.Roma]

I too am amazed at how people will not want to take any responsibility for their own actions, but demand/insist that it's the government's duty to "fix" whatever is perceived to be broken. (speaking generally, of course. Not pointing fingers at anyone here :wink

Of course it's a matter of Government's responsability to set anti-pollution standards and to check the respect of such standards. I don't see how this matter can be handled by the private sector.
Individual responsabilty is another matter. I think that everybody should consider that his own actions at small scale level have an impact at large scale level.

 

[mknox]

Of course it's a matter of Government's responsability to set anti-pollution standards and to check the respect of such standards. I don't see how this matter can be handled by the private sector.
Individual responsabilty is another matter. I think that everybody should consider that his own actions at small scale level have an impact at large scale level.

I think you just made my argument. If everyone followed your second point, your first point wouldn't be necessary. I can think of countless examples of people "blaming" governments for not taking enough action on (let's say) environmental issues while they themselves do nothing for the cause themselves.

 

[brianman]

I think you just made my argument. If everyone followed your second point, your first point wouldn't be necessary. I can think of countless examples of people "blaming" governments for not taking enough action on (let's say) environmental issues while they themselves do nothing for the cause themselves.

"Somebody should really do something about ___."
"Yes, you should."
"What? I didn't mean me."

 

[Raffy.Roma]

I think you just made my argument. If everyone followed your second point, your first point wouldn't be necessary. I can think of countless examples of people "blaming" governments for not taking enough action on (let's say) environmental issues while they themselves do nothing for the cause themselves.

Actually I don't know exactly if my first point comes first or my second point comes first. I think that there should be an interaction between my first point and my second point.
But it's true that the stress must be put on my second point. In Italy for instance interest among people for environmental issues is very low.

 

[RichardC]

Dont think this is a free ride for EV's! Taxing carbon will make the price of all energy soar!. Gas, Electricity, Airline tickets, Energy dependent industries, Food, and most goods and services. I don't agree with this tax. We pay enough without new taxes. IMO

The purpose of the tax is to reflect the external costs (think about Katrina, Sandy, flooding, droughts, etc.) that are being caused by global warming and to make carbon-emitting energy sources relatively more expensive than green sources of energy. As long as the tax is properly designed to be revenue neutral, that is to say that the amount collected in carbon tax is refunded to the public in the form of tax dividends or reduced income taxes, then there is no actual increase in the taxes borne by the public. Over time a well designed and progressive carbon tax program (where the rate of carbon tax increases predictably over time and applies to all goods, whether domestic or imported) will automatically encourage the development and growth of renewable energy sources (which will quickly become less expensive than the fossil fuel energy sources that they replace).

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If I were the benevolent but absolute dictator of the world economy, I would announce that, as of 1 Jan 2020, there will be a $50/MTCO2e tax globally. This lag would give economies time to adjust their capital stocks to use less carbon, reducing the huge hit that people would feel because their purchase decisions (e.g. automobiles) were based on a zero price for carbon emissions.

Pricing NOx and SO2 has been enormously successful in transforming the US power sector to emit less of those pollutants; pricing CO2 emissions would have a comparable effect. If there's no price, the market won't respond with new technologies and rational capital investments.

Absolutely right! The Europeans have had a high tax on gasoline and automotive diesel for years, and as a result have developed and drive far more efficient vehicles, make better use of electric transit systems and emit a fraction of the GHGs that we do in North America. Put in place the correct economic incentives and the free market will automatically shift from fossil fuels to renewables, in the same way that we largely eliminated acid-rain causing pollutants (which the industry declared was impossible when the new rules were introduced).

On a global basis the public purse, including in the US and Canada, is subsidizing fossil fuels at a rate of about $500 Billion dollars a year (not counting the cost of US military adventures in the Middle East). Remove those subsidies and tax carbon emissions to reflect the damage that they are doing and will increasingly cause, and the world markets will rapidly and efficiently adjust. I would propose a tax of $10 a ton starting next year and increasing by $10 a ton each year indefinitely.

The Brookings Institution published a paper and an opinion piece, links follow, which strongly support the implementation of carbon taxes:

http://www.brookings.edu/research/papers/2013/03/12-carbon-tax-gale
Carbon Taxes as Part of the Fiscal Solution

http://www.brookings.edu/research/opinions/2013/03/12-taxing-carbon-gale
The Tax Favored By Most Economists

“Looking for a public policy that would improve the operation of the economy, lower our dependence on foreign oil, reduce pollution, slow global warming, allow cuts in government spending, and decrease the long-term deficit? Then a carbon tax is what you want. As one of the few taxes favored by economists, carbon taxes could help the nation address several issues simultaneously.
The basic rationale for a carbon tax is that it makes good economic sense: unlike most taxes, carbon taxation can correct a market failure and make the economy more efficient. Although there are substantial benefits of energy consumption, there are also substantial societal costs – including air and water pollution, road congestion, and climate change. Since many of these costs are not directly borne by those who use fossil fuels, they are ignored when energy production and consumption choices are made, resulting in too much consumption and production of fossil fuels. Economists have long recommended a tax on fossil-fuel energy sources as an efficient way to address this problem.”

See also:

http://www.theglobeandmail.com/comm...arbon-tax-is-anyone-listening/article9584093/

http://www.huffingtonpost.ca/2013/02/01/carbon-tax-canada-oil-sands_n_2601606.html#slide=2013033

 

[Robert.Boston]

Not sure I agree with all your points, but I do believe you're on to something with this. I too am amazed at how people will not want to take any responsibility for their own actions, but demand/insist that it's the government's duty to "fix" whatever is perceived to be broken. (speaking generally, of course. Not pointing fingers at anyone here :wink

It's called the Tragedy of the Commons. Profit-maximizing individuals will overuse common resources unless there is governmental action to counterbalance that incentive.

Here in Boston back in the 1600s, landholders (like my forefather, Anthony) were entitled to graze a specific number of animals on the Common; this regulation ensured that there was enough pasturage for all the animals and that there was an equitable allocation of the shared resource. Absent such regulation, Anthony might have chosen to double his herd (yes, he lived on Milk Street) to make more profits; but if everyone had done this, the Common would have been overgrazed and able to support fewer total animals.

That colonial-era regulation was very primitive: it's a simple cap. If Anthony decided to get out of the dairy business, he couldn't transfer his unused grazing rights to a neighbor. Today, some fisheries use a "cap-and-trade" approach, that allows fishermen to sell their rights to another fisherman; we also use cap-and-trade in pollution rights, which ensures that the industries that can reduce emissions most cheaply do so first.

Once you have cap-and-trade, there is now a price associated with the activity, determined by the market but highly dependent on the cap level. Reduce the cap, and the price will rise. A parallel form of regulation is simply to set a price on the activity and see how the market responds. (Formally, this is the dual of the cap-and-trade model.)

So, for example, the City of Boston might have charged for grazing at a shilling per month per animal; this might have had the same effect as a strict cap, but allowed a more efficient allocation of the rights and, arguably, a more equitable distribution of the resulting wealth. Why should only animal husbanders benefit from the resource of the Boston Common? If the grazing fees were allocated pro rata to households, everyone would enjoy a portion of the wealth created by the common resource.

The analogy to carbon is direct: we have a classic "tragedy of the commons" because the planet has a limited ability to buffer carbon, but individuals rationally choose to use as much of that buffer as they find convenient, because it's costless (for them directly) to do so. We can't rely on the free market to solve the problem because, from the perspective of any individual person or corporation, there's no problem to be solved. When there is such a clear market failure, there is an appropriate role for the government to price the use of the Commons. We can do this through makeshift, patchwork regulations like CAFE, or we can do it cost-effectively through a carbon tax or a carbon cap-and-trade program.

 

[Lloyd]

Originally Posted by Lloyd

Dont think this is a free ride for EV's! Taxing carbon will make the price of all energy soar!. Gas, Electricity, Airline tickets, Energy dependent industries, Food, and most goods and services. I don't agree with this tax. We pay enough without new taxes. IMO

The purpose of the tax is to reflect the external costs (think about Katrina, Sandy, flooding, droughts, etc.) that are being caused by global warming and to make carbon-emitting energy sources relatively more expensive than green sources of energy. As long as the tax is properly designed to be revenue neutral, that is to say that the amount collected in carbon tax is refunded to the public in the form of tax dividends or reduced income taxes, then there is no actual increase in the taxes borne by the public. Over time a well designed and progressive carbon tax program (where the rate of carbon tax increases predictably over time and applies to all goods, whether domestic or imported) will automatically encourage the development and growth of renewable energy sources (which will quickly become less expensive than the fossil fuel energy sources that they replace).

Richard,

We have had droughts, hurricanes, floods and other natural disasters long before we began burning fossil fuels. To attribute all disasters, oddities in weather, and now even aircraft turbulence is just wrong. I don't believe there has ever been a new tax that has been revenue neutral as you subscribe. I see no evidence that this would be any different. Unless all countries subscribe to the same tax, (think global government) then it puts the countries that do subscribe at a disadvantage for thier goods and services, and the ability to purchase other countries goods and services.

 

[RichardC]

No kidding! Here in Canada, we still pay fuel taxes that were bumped up years ago to "nationalize" Petro-Canada (Allowed them to buy out Fina, Gulf and other gasoline retailers). Subsequent governments have sold off interest in Petro-Can (now owned by Suncor) but the tax is still there.

The Canadian taxes on fuels are a minute fraction of what is charged in Europe, and do not come close to reflecting the true cost of roads and other costs (including environmental impacts). The fact is than many taxes are reduced over time. In Canada both personal and corporate income tax rates have dropped very substantially, for example the top marginal rate in Canada has dropped from over 90 percent after the Second World War to around 50% or less now, and corporate taxes rates continue a downward spiral. An escalating carbon tax would enable our economies to continue to reduce income tax rates while accurately reflecting the true costs of carbon pollution.

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Because giving more money to the government will stop the climate from changing, lol.

Regardless of what is done with the money, of course increasing the cost of carbon pollution will in fact help to address the climate change problem. The European example demonstrates that the impact can be very substantial (and that tax was not even intended to serve as a carbon tax, but had the desired effect).

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Because not giving more money to the government will stop the climate from changing; ”The ’free’ ’market’ will take care of it.” Rolling around on my parquet floor and laughing out loud!

The free market can only work if there is a tax on carbon emissions. Global warming and other results of GHG emissions must be appropriately priced in order for the "free market" to take care of it (which will happen if carbon taxes are collected). Allowing carbon pollution to be dumped into the atmosphere for free is imposing major taxes on those who are going to have to pay the costs of future climate change (which will be all of us) as accelerating climate change makes damaging storms, drought, flooding, crop failure and other similar problems endemic.

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Not sure I agree with all your points, but I do believe you're on to something with this. I too am amazed at how people will not want to take any responsibility for their own actions, but demand/insist that it's the government's duty to "fix" whatever is perceived to be broken. (speaking generally, of course. Not pointing fingers at anyone here :wink

It is basic economic theory that externalities, costs (such as pollution) which are external to the costs of economic activity (such as burning coal to generate electricity), must be appropriately regulated and priced in order for the free market to function efficiently. This insight underpins the environmental regulation which has prevented the types of problems now apparent in China (and which would have acidified many of the lakes in North America in the absence of the clean air regulation). Realistically, it is only the government, acting in the broader public interest, that can regulate such matters. Absence such regulation the polluters are free to impose the costs of their pollution on all of us (which is what is happening now with carbon pollution).

 

[RichardC]

Richard,

We have had droughts, hurricanes, floods and other natural disasters long before we began burning fossil fuels. To attribute all disasters, oddities in weather, and now even aircraft turbulence is just wrong. I don't believe there has ever been a new tax that has been revenue neutral as you subscribe. I see no evidence that this would be any different. Unless all countries subscribe to the same tax, (think global government) then it puts the countries that do subscribe at a disadvantage for thier goods and services, and the ability to purchase other countries goods and services.

Llloyd, the basics of climate science including the approximate increase in temperature from increased GHGs in the atmosphere have been known for over 100 years. The evidence of climate change, ranging from increasing temperatures, rising seal levels, melting glaciers, melting arctic ice cap, increased forest fires, increased flooding, etc. are more than statistically significant. Our insurance rates are being increased substantially to reflect increased risks associated with climate change. There are countless reports which conclude that GHGs emissions are increasing the total energy in our planetary energy system, which is in turn increasing the frequency and severity of climate abnormalities. As long as the consuming nation taxes all imports in terms of their carbon content equally, then domestic manufacturing will not be harmd (and in fact will likely benefit as the manufacturers will get more carbon efficient more quickly). If North America were to move on this Europe would be onside very quickly and exporting countries such as China would either get in line or find their exports quickly becoming less competitive.

 

[Vger]

Here in British Columbia, we have had a revenue-neutral carbon tax for about 4 years. Guess what? Fossil fuel usage is down by more than 17%, and that decrease is accelerating.

And, no, the economy has not caved in; it is just fine thank you.

It works!

 

[Raffy.Roma]

Here in British Columbia, we have had a revenue-neutral carbon tax for about 4 years. Guess what? Fossil fuel usage is down by more than 17%, and that decrease is accelerating.

And, no, the economy has not caved in; it is just fine thank you.

It works!

I think whatever we do to reduce fossil fuel usage main thing is that we get good results.
@Vger
Very good post.

 

[mknox]

Here in British Columbia, we have had a revenue-neutral carbon tax for about 4 years. Guess what? Fossil fuel usage is down by more than 17%, and that decrease is accelerating.

And, no, the economy has not caved in; it is just fine thank you.

It works!

Curious to know if direct causation between the tax and the fuel consumption drop exists. There are lots of factors at play, not the least of which is how vehicles are getting more and more efficient every year (and not just in areas with carbon taxes). Here in Ontario, we tax alcohol quite heavily, but I don't think alcohol consumption is any lower as a result. People just gripe about it, but pay up. I remember when gas prices switched to the metric system, and Regular was 19 cents/liter. It's now about $1.25. People complain mightily, but still seem to drive as much.

Do you know what taxes were reduced to make the carbon tax revenue neutral?

(Not trying to be critical... skeptical, but genuinely curious about carbon tax effectiveness).

 

[ItsNotAboutTheMoney]

Curious to know if direct causation between the tax and the fuel consumption drop exists. There are lots of factors at play, not the least of which is how vehicles are getting more and more efficient every year (and not just in areas with carbon taxes). Here in Ontario, we tax alcohol quite heavily, but I don't think alcohol consumption is any lower as a result. People just gripe about it, but pay up. I remember when gas prices switched to the metric system, and Regular was 19 cents/liter. It's now about $1.25. People complain mightily, but still seem to drive as much.

Do you know what taxes were reduced to make the carbon tax revenue neutral?

(Not trying to be critical... skeptical, but genuinely curious about carbon tax effectiveness).

Province of British Columbia

Start from there I guess. I don't know how they dole out the revenue.

 

[jerry33]

Do you know what taxes were reduced to make the carbon tax revenue neutral?

(Not trying to be critical... skeptical, but genuinely curious about carbon tax effectiveness).

Sorry, don't know. However, BC gets it's electricity almost entirely from hydro and doesn't have that large a population (compared to area) so they have a big head start in being carbon neutral.

 

[RichardC]

Here in British Columbia, we have had a revenue-neutral carbon tax for about 4 years. Guess what? Fossil fuel usage is down by more than 17%, and that decrease is accelerating.

And, no, the economy has not caved in; it is just fine thank you.

It works!

Thanks Vger, I agree. There can be no doubt whatsoever that increasing the cost of carbon emitting fuels reduces consumption. This has been seen when gasoline prices rise due to increased oil prices (as occured a few years ago), where gasoline is subject to high taxes as in Europe, and where there is a specific carbon tax as in BC. There can be no doubt that it works.

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Curious to know if direct causation between the tax and the fuel consumption drop exists. There are lots of factors at play, not the least of which is how vehicles are getting more and more efficient every year (and not just in areas with carbon taxes). Here in Ontario, we tax alcohol quite heavily, but I don't think alcohol consumption is any lower as a result. People just gripe about it, but pay up. I remember when gas prices switched to the metric system, and Regular was 19 cents/liter. It's now about $1.25. People complain mightily, but still seem to drive as much.

Do you know what taxes were reduced to make the carbon tax revenue neutral?

(Not trying to be critical... skeptical, but genuinely curious about carbon tax effectiveness).

Whether the carbon tax causes consumers to drive less or to buy cars that use less gasoline and therefore emit fewer emissions, the causal connection between the increased price and the reduction in emissions is precisely the same, and in either case demonstrates that that carbon taxes work to reduce GHG emissions (as would be dictated by common sense and the experience in other countries). It is more significant to consider relative changes in price, rather than absolute price increases, when considering the impact of a carbon tax, as the carbon tax makes driving a high fuel consumption SUV relatively more expensive than driving a fuel sipping hybrid and even more expensive relative to a Tesla. Inflation makes all goods and services more expensive (in dollar terms over time).

 

[RichardC]

Sorry, don't know. However, BC gets it's electricity almost entirely from hydro and doesn't have that large a population (compared to area) so they have a big head start in being carbon neutral.

True (and it makes BC a great place to own a Tesla), but is not relevant to the effectiveness of a carbon tax to reduce fuel consumption (Vger's note refers to the reduction in fuel usage in BC since the carbon tax was introduced).

As one might expect, the price elasticity of gasoline has been the subject of extensive study by economists (with over a hundred papers having been published on this subject). The article at the following link provides an overview of this literature and indicates that a 10% real (inflation adjusted) increase in the price of gasoline will cause around a 2.5% reduction in consumption in the short term (within a year) and around a 6% reduction over the longer term (within five years). The factors contributing to the reductions include: a) reductions in the volume of traffic (around 1% within about a year, increasing to about 3% over five years or so); (b) increased efficiency in the use of fuel due to changes such as the use of more efficient vehicles, adoption of fuel conserving driving techniques, and driving in easier traffic conditions (resulting in increases in efficiency of around 1.5% within a year, and around 4% in the longer run); and (c) reductions in the total number of vehicles owned (by around 1% in the short run, and 2.5% in the longer run). See:

http://economics.about.com/od/priceelasticityofdemand/a/gasoline_elast.htm

The advent of the Tesla may further increase the elasticity of demand for fuels as there is now a credible, completely non-emitting, alternative to gas powered cars. In any event, there can be no doubt whatsoever that carbon taxes will reduce the consumption of fossil fuels and GHG emissions and are an effective and efficient tool for doing so which should be vigorously supported by anyone who cares about the mess we are leaving our children and grandchildren.

 

[mknox]

Thanks Vger, I agree. There can be no doubt whatsoever that increasing the cost of carbon emitting fuels reduces consumption.

I just happened to listen to an interesting Guardian Science podcast last night where they spoke with with the authors of a new book on these types of questions. One of the things they postulate is that since carbon emissions are a global concern, the real issue is that hydrocarbon fuels must remain in the ground and untapped for any real change to take place. If a carbon tax in one country reduces consumption there, will the resource companies simply extract less fuels from the ground? Probably not, and they'll just get sold into a different market where the CO2 simply gets into the atmosphere from a different point on the planet. As long as hydrocarbon fuels are being extracted from the ground, the resulting CO2 is going to get into the atmosphere from some place. To further exacerbate the problem, these resources are worth trillions of dollars to the companies that extract them, and it will be very difficult to convince them to walk away from that kind of money.

It was an interesting listen, and I would like to read the book at some point.

 

[Raffy.Roma]

I just happened to listen to an interesting Guardian Science podcast last night where they spoke with with the authors of a new book on these types of questions. One of the things they postulate is that since carbon emissions are a global concern, the real issue is that hydrocarbon fuels must remain in the ground and untapped for any real change to take place. If a carbon tax in one country reduces consumption there, will the resource companies simply extract less fuels from the ground? Probably not, and they'll just get sold into a different market where the CO2 simply gets into the atmosphere from a different point on the planet. As long as hydrocarbon fuels are being extracted from the ground, the resulting CO2 is going to get into the atmosphere from some place.

This is a very good point. I also think that CO2 emissions are a global problem. That's why in this thread

http://www.teslamotorsclub.com/showthread.php/13441-Climate-Change-Global-Warming-Discussion/page9

I proposed an International Committee be established in order to take care of CO2 emissions at global level.

 

[RichardC]

I just happened to listen to an interesting Guardian Science podcast last night where they spoke with with the authors of a new book on these types of questions. One of the things they postulate is that since carbon emissions are a global concern, the real issue is that hydrocarbon fuels must remain in the ground and untapped for any real change to take place. If a carbon tax in one country reduces consumption there, will the resource companies simply extract less fuels from the ground? Probably not, and they'll just get sold into a different market where the CO2 simply gets into the atmosphere from a different point on the planet. As long as hydrocarbon fuels are being extracted from the ground, the resulting CO2 is going to get into the atmosphere from some place. To further exacerbate the problem, these resources are worth trillions of dollars to the companies that extract them, and it will be very difficult to convince them to walk away from that kind of money.

It was an interesting listen, and I would like to read the book at some point.

Increasing the price of fossil fuels is the only strategy that can realistically be used to keep them in the ground (which is the only safe place for them). An escalating carbon tax applied consistently to all products produced or consumed in a jurisdiction is the best strategy for making this happen as the transparency of the pricing mechanism will provide the clear signals required for the efficient operation of the markets to transition to a post carbon economy. Every dollar spent on Teslas and solar panels is a dollar not spent on fossil fuel dependent infrastructure. We all need to vote with our wallets and also to pressure our politicians to act in the interests of our children and grandchildren by implementing carbon taxes and pressing for international agreements with other countries to make the taxes universal.

 

[Robert.Boston]

One advantage of a carbon tax v. a carbon cap-and-trade program is that an importing country with a carbon tax can levy an import tax on goods to even the playing field without violating WTO rules. What this means, in effect, is that the US can set a carbon tax on all products produced in or for the US market. Goods produced in carbon-intensive countries, like China, would lose some of their competitive advantage in the US market, and production would tend to shift towards low-carbon countries. Countries that rely heavily on export to the US would have a strong incentive to reduce the carbon-intensity of their economy to stay competitive.

Six people sit in a lifeboat with six bailing buckets. There is a leak in the boat that is letting in water at a tremendous rate; it will take all of them working together to keep the boat from sinking. Do you sit there and wait until the other five start bailing, or do you pick up your bucket and set an example?