Comment by jsharf | Hacker News Reader

Comment by jsharf | Hacker News Reader

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Yes, but maybe steel is more essential to society than burning natural gas. But natural gas companies make more margin so they can afford the carbon credits, meanwhile steel has tighter margins so it gets passed to the consumer. This means it might disproportionately limit the consumption of things based on how much money they make. This is all fine until construction becomes more expensive because you can’t easily get the steel you need for buildings (what if you were trying to build a clean energy power plant and. Is it’s too expensive?). Some things are essential and need protection from the free market (ex, hospitals have diesel backup generators. Those would become more expensive). You could add a government subsidy for steel, but now you’re stacking laws on top of each other and playing centrally organized government. Which doesn’t work well.

The downside to having separate laws per industry is that you’ll get insane workarounds (see import tariff law). Carbon is carbon — so workarounds are easy. For example if natural gas is taxed higher than steel, you’ll have natural gas companies producing just enough steel to be qualified as steel production companies so that they get the lower rate. Or something like that.

Choosing policy is tremendously difficult. We could deliberate all day. despite what I’ve said, a carbon tax is better than doing nothing, and we would be wise to start creating/increasing carbon taxes already.

If a) steel is more essential to society than burning natural gas and b) steel production is carbon-intensive, then an across-the-board carbon tax has two effects.

1. In the short term it makes steel more expensive. But because steel is essential, we still use it, it just costs a little more. If you're building a clean energy power plant, or making a generator for a hospital, some of the tax revenues could go to you, to make those things still affordable.

2. In the longer term, there are now huge financial incentives to either reduce the carbon consumption of steel production, or to replace steel with something which uses less carbon. Which is what you want.

If we look at just steel:

Your implicit assumption is that companies are willing to pay more for steel. An increase of just a single digit percent more to the price of steel is enough to be completely uncompetitive with overseas steel production, which would inevitably lead to the closing of all local manufacturing capacity of steel.

Steel production is also a commodity critical to national security. Losing access to foreign steel due to war or other concerns would literally bring the country to its knees for the duration of the encounter.

Shifting all local manufacturing capability overseas to where there is less regulation sounds good, until it doesn't... as we saw during the pandemic. The world would have looked a lot different today if Chinese manufacturing had closed or decreased for more than a few weeks (roughly Jan-Feb, much of which coincided with the usual Chinese New Year shutdown that is typically planned for).

But shouldn't carbon tax equally apply to imported steel? It wouldn't make any sense to only apply it to domestic.

So, I can see one obvious issue here. How do you know that what they say about their steel's carbon load is true? This goes double as they're incentivized to lie to you, you have minimal control over what happens in their country and worse, the incentives go all the way up to the nation states level, as being carbon neutral is counter to growth.

1. creates an insanely huge web of tax breaks, silver lining is that we would have a lot more accounting positions.

2. Replace steel? I see how this rationale works, we strive to replace X for something that generates less carbon, this ought to work to some extent until nothing more carbon neutral exist.

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