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Comment by suster | Hacker News Reader

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.

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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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