Why Carbon Taxes Work

1) Tax carbon at the source - yes, that means every oil well and coal mine pays a whopping great tax before any fossil energy leaves the front gate. Prices will adjust all the way down the supply chain

2) Use this huge income source as global helicopter money, the dividend every person in the world gets from allowing other people to destroy their global shared ecosystem

3) Create various green energy projects into which citizens can invest their dividend

4) Planet does not become unliveable mad-max hell within our lifetimes?

That a carbon tax is a source of information about the highest leverage areas we can change is a great framing.

Unfortunately, the main barrier to implementing a carbon tax is how we treat imports, which is the key to getting the whole thing to work. Failing to solve this means importers deindustrialize in favor of countries with more lenient carbon pricing regimes.

“Do I have to spell it out for you? Just implement a border-adjusted carbon tax!” they’ll retort: “that will cause exporters to harmonize their standards with the markets they sell to.”

I can see how this works for plastics (producing PTFE in <Exporter> would have a carbon tax of $2/ton), but what about complex, assembled goods like cars with complex supply chains, like a Hyundai assembled in S Korea with parts from more than 60 countries? The Americans need to trust the S Koreans to tax that, and the S Koreans need to trust the Chinese, Indians, Canadians and Japanese to be implementing theirs properly. Every major component in an assembled good becomes a problem.

Carbon tax works when all countries implement it, but what’s the equilibrium given current starting conditions?

As long as the pollution tax is higher than the cost to clean up the pollution it works, because then the company cleans up the pollution for you.

Also massive incentives to reduce pollution, and reduce cost of pollution cleaning technologies.

Global warming is a global problem. While carbon tax would be levied locally, creating incentives to just shift production to low or no tax locations.

Just as harmonisation over Cororate Tax is finally emerging, similar cross-border agreements should be needed for a Carbon Tax.

This used to be a conservative and Republican idea. I'm grown up enough to admit that they are right: The market is absolutely the best way to decide who pays based on the cost of the externality, in this case, Kg of Carbon Dioxide in the atmosphere. We need this to start now, so it can be phased in over 10 years. We need to get all the big nations to jump off this cliff with us at the same time. The alternative is crazy. Yes there will be winners and losers, there always are. It will be very hard on some folks in the midwest, and the 150 coal miners left, and the fossil fuel companies and people in that industry. I hope they've all diversified into solar and wind by now. It's all too late, they suppressed this change for 20 years now. In that time, average temperature has risen by .8 degrees where I live. Time to put on the big boy pants and make the hard decisions, folks.

I agree that externalities should be priced in - but I wonder if in practice Governments would end up footing the bill via subsidies.

For example, look at what happened in France with the fuel tax rise which lead to the “gilets jaunes” protests.

If people need to get to work and heat their homes etc. then putting a tax on all of that will hit them hard while the rich will be relatively unaffected and can continue polluting. A simple flat tax on CO2 emissions, while far easier to implement, would be regressive compared to one that scaled with your personal emissions or something.

Such a regressive tax, levied on basic things like energy, fuel etc. that are fundamental to normal life seems incredibly likely to trigger political unrest as we saw in France.

No. Carbon taxes are an accounting trick.

Just fucking deploy modern nuclear technology. Run trains and heating and industrial heating for entire cities limitlessly with a predictable dollar budget. Zero carbon emissions.

The problem I have with this entire line of argument is how in reality you have nations such as China generating significant volumes of carbon credits in exchange for that sweet cash generated by gullible nations.

We have the Department of fucking Energy and a thousand other agencies that have researched and operated this technology for decades in the most grueling environments (Nuclear Submarines and other classified domains) and it is more than ready for large scale commercial use.

Imagine having limitless power to run projects of Earth scale -> Literally convert saltwater of an ocean into freshwater and pump it continuously into deserts or inland. . . Turn off natural gas heating entirely in the northern hemisphere thanks to electric heating . . The possibilities are endless.

Carbon Taxes work because the market can't solve a problem it doesn't have a price for.

Knowing the word "externality" is all you need to know.

In the Adam Smith/Ayn Rand fantasy of money and the invisible hand, markets are a form of Artificial Intelligence. The fantasy is this AI can run the markets better than any centralized authority. Even if we assume that's true right now the AI has no price for carbon, can't take into consideration, hence it can't "solve" it.

This is the equivalent of having a self driving car that wasn't trained to see bycicles. Obviously, it will keep killing cyclists until you give it training data to see them. There is no "market solution" for a blind AI system that doesn't see carbon, because the AI has no data set for carbon costs.

Gasoline prices have little impact on demand. https://www.eia.gov/todayinenergy/detail.php?id=19191

For this reason alone Carbon taxes do not work. In my jurisdiction, we already have over 100% tax on gasoline. Partly for road building purposes, but still obviously not impacting usage.

Hybrids coming around ~2000 certainly had a visible effect but it wasn't enough. Which is why Rivian, a company which has delivered no cars, is worth 97 billion. Tesla is worth a trillion. Whereas Ford is only worth $78 billion. We must get to EV transportation asap. We must electrify our railroads. We must electrify our planes.

In fact, carbon taxes are bad. Very bad right now. Because prices are inelastic it makes the tax regressive and anti-compounding.

So gasoline prices go up. Trucking immediately is more expensive. Products prices go up. But because product prices are higher, inflation etc. trucking gets more expensive. Alberta recently had a carbon tax and allowed this circle to run for some time. An interesting thing happened. The prices didn't go higher. This is a problem. The price available to oil value crashed instead. So while WTI was about $50/barrel. WCS from Alberta went to $5/barrel. The albertan oil industry couldn't sell their oil. The trucks weren't running. Alberta repealed their carbon tax which nearly immediately fixed the problem. Their economy was basically halted. No trucks running means people will soon stop eating.

Imagine 10 years from now. We have maybe 30% of vehicles gone EV. Who owns those? The rich. The rich no longer pay the 100% tax for building roads. Who is paying for the road tax and carbon tax? the poor buggers driving the 15 year old shitmobile. The poor end up paying and the rich dont? Pretty regressive.

Of course they work. Fuels have historically been taxed quite highly in some countries. EVs are doing well in those countries and these countries tend to be a bit ahead of the curve in terms of adoption. Financial incentives help so they are a useful tool.

One caveat here is that governments also hand out subsidies and a much more effective way to penalize carbon emissions is simply to stop subsidizing it and then add the carbon tax on top. Yes, EVs get subsidized too. But it's peanuts to the many billions the oil and gas companies still continue to get their hands on to perpetuate the problem.

Whenever you hear oil companies defend blue hydrogen what they are really talking about is getting payed (with tax money) for the process of pumping insane amounts of natural gas for the next few decades so they can use that to produce hydrogen. That's "the hydrogen economy": pumping yet more gas to speed up how quickly our planet heats up. They'll emphasize how important that is and how green it is (or could be). Never mind that it is completely unprofitable to capture carbon at scale and of course tax payers are going pay for them pretending that it's going to be meaningful amounts. That's the game right now in terms of handouts. We're talking tens of billions being allocated for this madness.

Companies often double dip even and get also get subsidies for cleaning up their act (or pretending to) while also taking full advantage of governments wielding their power on their behalf, public spending on their infrastructure (e.g. pipelines), leniency when it comes to environmental issues, permits, and public money generally being used to clean up their mess.

A carbon tax would go towards balancing that; but only a little bit. Eliminating subsidies for carbon producers would cost the worst offenders the hardest and actually level the playing field in terms of cost for the alternatives that they've been allowed to unfairly undercut in pricing.

The irony is that getting rid of the subsidies is somehow more controversial than carbon taxes. That's how messed up our world is. We're actively paying to destroy it quicker currently. Every time you pay your taxes.

It depends on who gets the taxes.

If it goes to greedy bureaucrats that waste it or are themselves bought and for it will be worse than no tax at all.

Then the system will be used by lobbiests to attack one industry in favor of another.

I’ve never been more astounded than when in the company of absolute geniuses in Silicon Valley, watching them discuss the economics of a carbon tax without having once encountered a real world carbon tax credit trade or having seen the dishonesty of the entire system.

Tl;dr: It isn’t a system to “inform one of the behavior one needs to change most urgently” as the author puts it. It’s a transfer of wealth from the economies that impose it to the economies that find a way to leverage the arbitrage.

Going green doesn’t need to be a punitive process, Infact, all indications from our efforts over the past decade indicate that punitive measures are far from perfect. The incentive for solar and wind energy, for example, has saddled places like Germany and California with systems that dont scale with growing demand, leading to temporary large burns of dirty coal or arguably worse, cutting off power to whole cities for hours.

Intelligent societies solve problems through innovation. A billion dollars to five or so independent contractors to set up efficient modular nuclear reactors with some entity like the Army Corps of Engineers or experts from the energy department assisting with oversight and safety would completely change the game over night.

You can still fly to meet your family and cities can run public infrastructure around the clock carbon free for any demand load we can imagine for the next century.

The issue is precisely the idiots who come up with the ideas of a carbon tax. Bureaucrats. Won’t be around by the time the idea fails so the blame falls to someone else.

The legal and regulatory barriers holding nuclear back in the US right now is one of the gravest mistakes of the coming century.

Watch "Lords of Scam". Carbon taxes not only don't work, they breed corruption.

Carbon taxes only work if they are applied universally worldwide.

If a carbon tax is applied in just one country, then people are rewarded for shifting carbon intensive activities to another country.

There also needs to be a clear answer to 'who should receive the carbon tax revenue?'. If countries receive the revenue, they have an incentive to try to attract carbon intensive industries to collect revenue from them.

The only real solution is a worldwide tax paid by countries to something like the world Bank. Each country could then tax their citizens equally.

Another tax on the middle class, because they don't have enough of a fiscal burden already, in the goods they need, in paying gas when they drive to work (no, not everyone has a very green public transportation that gets them to work in an efficient fashion).

Do these people even know the carbon footprint of manufacturing a solar panel or a wind mill for their "green" energy?

I do agree that products should be manufactured locally, but that has nothing to do with the environment.