So if the generators exist, it is shady but investors keep their profits. If the generators don't exist then it is still shady, also a scam, and everyone loses money (+ jail time for some).
The question I'd have is why haven't the federal government closed this loophole either way? I understand incentivising solar, but this is rather having the federal government pay the full cost (or more in some cases).
> The most efficient solution is a carbon tax that fully captures externalities.
I'm all for that once someone comes up with a rigorous, apolitical calculation for what that value is. It's much easier to identify the existence of unpriced externalities than it is to quantify them. I know people associated with the IMF have attempted to do so[1], but they still admit the calculations are "contentious".
> I'm all for that once someone comes up with a rigorous, apolitical calculation for what that value is.
Which is just code for "I'll never support this because I'll never believe you". Dismissing something as "policital" is the easiest out. All it takes is for your political enemies to support something and you have a built-in excuse to refuse to believe it. That is exactly the behavior that led to the circumstance we're in right now, where literally half the voting population of the USA straight up refuses to recognize scientific consensus.
So... this isn't helpful. If you really want good analysis, get in there and help with it. Or at least be willing to accept something as "good enough". But what you wrote there is nothing more than a fancy excuse.
I don't believe this is possible for something as wide-ranging as the effects of increased climate change.
Every paper that attempt these estimates use a 'local' projection of (predicted change) * (current prices to mitigate those changes).
But even ignoring the huge error bars around the scale of changes we'll see, the large-scale changes that reach across all of society will also change all the prices as well; not to mention it's not easy to predict far future prices anyway.
This also ignores the fact that the marginal impact of a ton of CO2 in the future depends on how much CO2 is then in the air, which means you're now in the realm of predicting what current politicians will do ... which is inherently political, since it'll make some people look good or bad.
An obvious solution is to use the cost of taking the carbon back out of the atmosphere. You make a mess, you pay the cost of cleaning it up.
Supposedly, Carbon Engineering is on track to do that for $100/ton CO2.[1] One gallon of gasoline produces 20 lbs of CO2.[2] So 100 gallons makes a ton of CO2 and $100/ton would add $1/gallon to the price of gasoline, not counting a little extra for the energy expended by refineries and so on, and the cost of sequestration.
Climeworks is also targeting $100/ton, and Global Thermostat thinks it can do half that at scale, while the CarbFix project has demonstrated permanent sequestration in basalt formations for $30/ton. [3]
> An obvious solution is to use the cost of taking the carbon back out of the atmosphere.
Surely that's more or less an upper bound to the cost of the externality? If it were higher, we would undo it by scrubbing the air, if it were lower, scrubbing wouldn't make economic sense.
I don't think "Let's put the absolute maximum tax on this" is a strategy that works very often.
The whole point of an externality is that the people doing the damage aren't the ones paying most of the cost. There's no rational limit to the cost an economic actor will impose on others for the sake of some small personal profit.
So we can't just say that the cost of damage must not be so high, or we would already be cleaning it up. There is no "we," there's individual actors and messy politics, full of entities making personal profits who are good at influencing politicians.
On top of that, the costs aren't even paid by us today, they're paid partly by our future selves decades hence, even more by future generations, and impossible to exactly predict. That makes it even easier to focus on today's personal profits and ignore the externalities.
Put another way, this is a public goods problem, where individual efforts make little impact unless everyone does them. Everyone is better off if the problem is fixed, but individually profits more by freeloading. The game theory says individual contributions go to zero. Once again, the only solution we have is political.
And finally, the technology to clean up the mess for $100/ton is just now beginning to emerge. We're not doing it already because we can't do it yet.
Most climate economists estimate the cost of carbon at several hundred dollars per ton. So yes, the cost is higher, and yes, we should scrub the air, once we're able.
Inaction is also a choice. The idea that you can opt out of acting on climate change is an illusion. We choose every day. Currently, we choose 0 carbon tax. That is a very political calculation.
You’re already in the game. The clock is ticking and not playing is not an option.
Is it a political opinion to state a fact? The real statement being made though is actually that climate change is bad for humans and should be avoided. This isn't really up for debate as it is proven to have happened multiple times in history and caused the end or decline of major civilizations. We know humans are bad at dealing with massive climate change, especially ones that reduce farmable land or loving space. None of that is political. Politics only comes into play when you ask is convenience and profits now an acceptable payback for damage to future generations. Essentially are we responsible for taking care of future generations or should they take care of themselves? That's the political question.
Why do you need to calculate it upfront? Have a simple feedback loop by setting an initial tax level and adjusting it up or down compared to your target emissions curve.
You do that by raising the tax $0.10 every 3 months until your tax is at the right price.
The issue isn't $10/gallon gas. The issue is $10/gallon gas suddenly.
If everybody knows that gas is going to go up every quarter for the next 10 years, things will adjust. Businesses will start making long-term decision around the increase. People will buy smaller cars and will start screaming for mass transit.
I think you're being hyperbolic, but then again, that's probably the misconception most people have when they hear of carbon tax. If Canada is any indication, you probably wouldn't even notice it at 4.4 c/L to start up to 11c (or 16c/gal -> 41c/gal).
$300 is a number that has been calculated several times as the externalities caused by burning a tonne of carbon. That's over $6 per gallon, so I'm not being hyperbolic.
Considering the hysteria that $10/tonne is causing in Canada, I don't think my riots statement is hyperbolic either.
Here in Canada, the "hysteria" is due to the perceptible economic slowdown, bordering on recession, associated with the carbon tax.
If such a minor tweak is enough to make businesses pull investment, then surely more than tripling the price would be ill-advised.
Then you have the fact that transport, and hence fuel, affects the price of most goods, so fears of a recession (decrease in purchasing power) are not unfounded.
Also consider that, while justified as addressing a "tragedy of the commons scenario", rarely do such tax dollars go towards mitigating the externalities in question.
The tax would sting less if it was being spent building renewable energy rather, than initiatives that are charitably described as contentious and perhaps more accurately described as pandering.
If we could avoid the graft and self-dealing usually associated with federal spending, that would likely cut down on the complaints as well.
Putting carbon taxes towards externality mitigation would be double dipping. The whole point of the carbon tax is that it is pure incentive as it is, nothing more should be needed.
And giving the carbon tax back to people as a dividend is not pandering, it's making a highly regressive tax progressive.
Giving money directly to people is the purest and most effective form of economy pumping. So while carbon-intensive businesses are hurt other's will benefit; recession fears are completely overblown.
And the carbon tax is the most efficient form of carbon mitigation strategy. Did you see the recent news about Doug Ford's plan being twice as expensive as the carbon tax?[1] And it is imposes the costs almost exclusively on industry, increasing the chance of a recession much more than the carbon tax it would replace.
I did the calculation myself due to multiple conflicting numbers in this thread: I get 2.6 dollar per gallon of gas (8.65kg CO2 produced by complete combustion of 1 gallon gas):
300$/ton * 8.65kg = 2.6$ per gallon (0.6$ per liter)
100$/ton * 8.65kg = 0.87$ (0.23$ per liter)
30$/ton * 8.65kg = 0.26$ (0.07$ per liter)
7 cent per liter seems quite acceptable. And people are reporting that some companies are targeting that price point for sequestration. Please correct my if I miscalculated something.
OP said "by burning a tonne of carbon" rather than "by emitting a tonne of CO2," which is the main reason your calculated per-gallon results are significantly higher than mine. Neither interpretation gets close to $6/gallon in added taxes, so I'm not quite sure what OP meant.
A tonne of gasoline occupies about 350 gallons and contains about 85 percent carbon by mass. At $300 per tonne of carbon that translates into a tax of about 73 cents per gallon.
The desired effect is net-zero carbon emissions. Which means all fossil fuel vehicle emissions must be offset. That'd make it cheaper to switch away from fossil fuel for the vast majority, but there will always be use cases for fossil fuels.
I disagree the most efficient and politically palatable solution is an excise tax on products that consume fossil fuels. AKA slap a $5000 excise tax on new cars. You can use the money to buy back older cars. Same deal with gas furnaces and the like.
Because such a tax would be regressive that it would be beyond stupid to attempt, even at half that amount. Already government regulation, taxes, and fees, affect the poorest among us. Those hiked cost to register your vehicle, obtain a license, renew plates, and such, all hit that segment the hardest.
You want a carbon tax, put it where it belongs, tax vehicles that return less MPG and priced beyond average car price purchases of the middle class. That Vette over there, bam, 10k extra. That Ferrari, 50k. See that lovely Audi S5 sport coupe, tack on another 10k there too. Tax small planes, tax motorcycles beyond a certain CC and size, but never tax the fuel. To encourage a change in what is an acceptable method of transportation means taxing what you don't want more of, not punishing those who are least able to withstand it let alone are not causing it.
Far more US CO2 emissions come out of the tailpipes of 10 year old Camries than of brand new Ferraris. Seriously reducing transport emissions requires reducing how much petroleum the middle class burns, one way or another.
Carbon fee and dividend can avoid the regressive effects of a plain flat carbon tax.
The question I'd have is why haven't the federal government closed this loophole either way? I understand incentivising solar, but this is rather having the federal government pay the full cost (or more in some cases).