As the social cost of carbon is impossible to estimate, instead the goal is net-zero emissions by date certain.
Noah Kaufman, the lead author of the research highlighted by David Benson above, has been hired by the Biden administration as an advisor. He joins several other top administration officials who favor a carbon tax:
Carbon Tax and Revenue Recycling: Revenue, Economic, and Distributional Implications Kyle Pomerleau, Elke Asen 06 Nov 2019 Tax Foundation taxfoundation.org/carbon-tax/
" A carbon tax paired with a cut in the employee-side payroll tax increases progressivity, output, and employment." Key finding #5
So let's use most of the carbon tax revenue to lower the payroll tax, with minor portions going towards targeted dividends and clean-energy R&D. Such a use of the revenue would be economically benign--and perhaps politically attractive.
According to a table near the end of the article above, a $50 carbon tax, by itself, would cut 421,000 jobs in the US. But if the carbon tax were paired with a proportional reduction of the payroll tax, the combination would increase employment by 102,000. (The payroll tax cut, in isolation, would apparently create 523,000 jobs.)
Now this combination would be fine for the economy and for those with jobs. But not so good for most of the unemployed. So from a social and political perspective, it would be desirable to use some of the revenue--perhaps 16%--for targeted dividends (as well as 3% for R&D). That way 81% of the revenue could still be used to lower the payroll tax and create some 424,000 jobs (523,000 x .81). The result would be a small net gain in jobs (424,000 - 421,000 = 3,000), a happier public, and a more receptive Congress.
Carbon Tax and Revenue Recycling... it would be desirable to use some of the revenue for targeted dividends...
The value of refunding a carbon tax to the taxpaying public is political. With so many voters receiving crumbs from the table, the giants of industry would be unable to rescind a carbon tax. What is usually missing from the discussions (about a carbon tax pressuring industry to convert from carbon-based sources of energy) is the provision of adequate noncarbon sources of energy for them to convert to! Unless the industries are in a part of the world blessed with mountains for hydro to level renewable energy, a carbon tax simply threatens to shrink their industry and sack its workers.
The value of refunding a carbon tax to the taxpaying public is political. With so many voters receiving crumbs from the table, the giants of industry would be unable to rescind a carbon tax.
The value of refunding the tax is also economic. Recycling over 80% of the carbon tax by lowering the payroll tax (which is deducted from workers' paychecks) will actually boost the economy. And, as you say, it won't hurt politically either.
What is usually missing from the discussions (about a carbon tax pressuring industry to convert from carbon-based sources of energy) is the provision of adequate noncarbon sources of energy for them to convert to!
A carbon tax, by shifting incentives, will help provide improved noncarbon energy sources such as SMRs.
Unless the industries are in a part of the world blessed with mountains for hydro to level renewable energy, a carbon tax simply threatens to shrink their industry and sack its workers.
An argument for some initial moderation of the tax.
Recycling over 80% of the carbon tax by lowering the payroll tax ...
I had a T-shirt made, saying "Tax carbon not people", to wear at demos. It is an appealing thought, that we should tax bad things like carbon rather than good things like wages. However unless the money goes directly into general revenue, the money raised is so great as to become a corrupting influence in its own right.
The proposal to redistribute to the public is a case in point. Once the voting public has come to appreciate their annual "carbon bonus", they are likely to lose their enthusiasm for stamping out fossil carbon – killing the golden goose. When economists talk about carbon trading, they very quickly drift into speaking of an ongoing world market, a billion-dollar traffic with vested interests galore and no end in sight. Economists don't want to kill their golden goose either. Similarly, government treasurers would hesitate at the double whammy of replacing a lucrative coal-fired power station with a very expensive nuclear equivalent.
I had a T-shirt made, saying "Tax carbon not people", to wear at demos. It is an appealing thought, that we should tax bad things like carbon rather than good things like wages.
I love the T-shirt and the underlying sentiment.
However unless the money goes directly into general revenue, the money raised is so great as to become a corrupting influence in its own right.
This is a revenue-neutral tax (excepting the 3% for clean energy R&D). 81% of the revenue is used to lower the payroll tax, and 16% finances dividends for lower-income households. There is no big pot of money left over for lawmakers to spend.
Once the voting public has come to appreciate their annual "carbon bonus", they are likely to lose their enthusiasm for stamping out fossil carbon – killing the golden goose.
Because a carbon tax is regressive, hitting the poorest the hardest, it is right that we try to make them whole. Both the payroll tax cut and the 16% of revenue used for a "carbon bonus" will help in this regard.
As carbon emissions fall substantially and carbon revenue declines, we can, if needed, transition to taxing general energy sales also . Sun Power and Earth Power are pretty big golden geese in their own right, with much longer life spans.
When economists talk about carbon trading, they very quickly drift into speaking of an ongoing world market, a billion-dollar traffic with vested interests galore and no end in sight. Economists don't want to kill their golden goose either.
With a carbon tax, as opposed to cap-and-trade, there is no carbon trading--not even in the name.
Similarly, government treasurers may hesitate at the double whammy of closing down a lucrative coal-fired power station in favor of a very expensive nuclear equivalent.
A carbon tax gives people flexibility and lets them make their own choices. I doubt whether the transaction your describe would happen very frequently.
Well, RC, I think I've said enough on this sub-thread for a while. You may have the last word, if you want. Meanwhile, "Tax carbon not people"!
Another reason for setting a very low initial carbon tax is to get an audit of current carbon emissions. If the emitters are promised they will only be taxed a few millidollars per ton, they cannot complain and must comply with the initial carbon tax, with its implied audit. Because tax must not be evaded, the audit should be comprehensive.
The people with the best idea of how much a company's activities emit would be the company's own professionals. For example, a coal mine typically heaps up its overburden of too-low grade carboniferous rock with the stated intention of putting it back in the hole after the mine closes. However any coal which is exposed to the air continuously oxidises (and occasionally ignites). Only the locals would know how much has escaped by the time the remainder is bulldozed back into the hole.
Similarly, methane escapes during extraction and the broken reservoir bleeds afterwards. Gas pipelines leak one or 2%, worsening as the pipeline ages. They only get repaired at the rate when the losses affect profits. Gas is consumed during its liquefaction. Once piped onto the ships, it routinely leaks from the ship before, during and at the end of its journey. Re-gasified, it leaks from the distribution pipes and so on. When the eventual gas turbine or furnace is off its peak performance, emissions increase. There might be a different company at each stage, but each stage emits, so each company must pay a carbon tax. Their own professionals know how much their company has emitted. With an adequate audit of emissions up- and down-stream of the commodity, the taxman can keep them honest.
Post by Roger Clifton on Apr 26, 2021 19:18:02 GMT 9.5
A carbon tax would definitely help nuclear power plants in the US stay alive in the face of competition from cheap gas. It is especially apropos now that the Biden administration is requiring all administrations to exit fossil carbon power. However, in this case it would be effective precisely because the states have a choice of what power to supply and consume.
In other parts of the world including mine, purchasers only have a choice between various shades of carbon. We are not "on a pathway to net zero", not as promised by the Australian Prime Minister to the Biden Summit conference. Especially without a carbon tax and alternatives to choose from. Instead any initiatives will rely on gas, repainted green with promises of CCS. The Prime Minister promises our industries that there will be no carbon tax, possibly so that it does not increase the cost of products falsely labelled solar for export.
Any contract to produce his "clean hydrogen" with solar panels would certainly include some fine print that allows the manufacturer to resort to gas in the unspeakable event that the sun ever leaves high noon. I suspect that trusty accountants would ensure that no gas consumption appears on the books, and therefore avoids liability to any internal carbon tax, or carbon tariff when exported.
In other parts of the world including mine, purchasers only have a choice between various shades of carbon. We are not "on a pathway to net zero", [...] Especially without a carbon tax and alternatives to choose from.
The US is currently in the same boat. (US states may build nuclear plants, but given cheap natural gas and the cost and headache of building large nuclear plants, no utility will build one without massive federal subsidies.)
DBB, I like the name "Carbon Air-Disposal (CAD) Fee". A few related thoughts about pricing:
The average dumping fee  for solid waste disposal in the US is about $55 per ton. So, theoretically, dumping a ton of coal in the local landfill would cost $55.
Now burning a ton of coal produces about 3.67 tons of CO2. If we charge the same $55 for atmospheric dumping of a ton coal, then the CO2 price--the air-disposal fee--would be $55 per 3.67 tons of CO2, or $15/ton of CO2.
And actually, that's not a bad starting point for a national CAD fee.
At the end of James Hansen's current Temperature Update on his Columbia University website, he writes:
There is a wide gap between reality and the picture that governments paint about the status of actions to limit global warming. Actual government policies consist of little more than tinkering with domestic energy sources, plus goals and wishful thinking in international discussions.
Solution of the global warming problem has two fundamental requirements:
The first, underlying, requirement is for a simple rising carbon fee. The fee could be made near global via border duties on products from countries without the fee. The public would accept a rising carbon fee if all of the resulting funds was distributed uniformly to domestic citizens.
The second requirement is for technology to produce baseload dispatchable carbon-free electric power at a price below that of fossil fuels. Based on the price of nuclear fuel and the amount of material (concrete, steel, etc.) in a power plant, one technology with that potential is modern nuclear power.
A proposed border tax by the EU will put pressure on other countries to adopt a carbon fee (and border tax) of their own. One factor the US should consider:
Alternatively, it could be an opportunity for the United States to lead, said Rorke of the Climate Leadership Council. Recent research the group has supported revealed that U.S. industries, including steel, are more carbon efficient than their counterparts in other countries, giving them an advantage if a carbon border tax were put in place.
A proposed border [carbon] tax ... could be an opportunity for the United States to lead
The carbon content of US aluminum could be reduced by changing the anode in the Hall–Héroult process, where alumina is dissolved in molten cryolite (sodium aluminum fluoride) and electrolysed. Current practice is to use a graphite anode so that the oxide ions are converted directly to carbon dioxide rather than free oxygen. Less electric energy is required, but the carbon dioxide is emitted, adding to the liability to a carbon tariff on the aluminum.
The carbon content of US aluminum could be reduced by changing the anode in [electrolysis of] alumina.
Much larger gains in the carbon content than the smelting of aluminium can be made in the smelting of iron, if the problems at the anode can be resolved. Iron metal is much cheaper than aluminium metal, and the use of blast furnaces gives it a much higher carbon content, so a carbon tariff would be a much higher proportion of the cost of the metal and other exported products like cars.
Similar to the smelting of aluminium, iron oxide can be dissolved in iron chloride and electrolysed above 677° C, the melting point of ferrous chloride. Similarly the design of the anodes presents a technical challenge, to release hot pure oxygen without itself being corroded. The iron ore itself can form something of an oxygen resistant anode as it floats on the chloride liquid. Ferric chloride (inevitable at the anode, BP 315° C) would attack the iron oxide directly but could also attack metalwork or decay to release chlorine gas into the exhaust stream. Clearly, the anode needs R&D.
"Next on GPS, I will offer you one easy solution to the climate crisis. Really, there is one, and I will tell it to you when we come back." Fareed Zakaria, Global Public Square (GPS) program, 20 Jun 2021, CNN Network (USA).