03 February 2011

Carbon Tax

I just read a piece on Grist.org (http://www.grist.org/article/2011-01-28-investment-is-win-win-for-global-economy-and-climate-stiglitz) about Nobel Prize winning economist Joseph Stiglitz regarding combating climate change and improving the economy. He feels that the investment in a societal good, instead of simply trying to stimulate spending on consumption, will help the world out of the current recession. I tend to agree. He thinks ultimately that a price on carbon emissions needs to be instituted to create the incentive to invest in clean energy and a disincentive for the consumption of fossil fuels. His figure was $80/ton of CO2.

To put this into perspective, I looked at the CO2 emissions of a variety of fossil fuels:
Gasoline: 19.4 lbs/gal = a $0.78/gal tax, or a little over a 25% price increase.
Diesel: 22.2 lbs/gal = a $0.88/gal tax
Natural gas: 11 lbs/therm = a $0.44/therm tax. Current US average price per therm = $1.07, so this is about a 41% increase. This is tougher on the poor to pay this. It also puts a hit on business. Then phase it in over 5 years. Use the tax generated to give a tax credit for efficiency upgrades.
Coal: For the generation of electricity, coal produces 1.3 lbs/kWh = $0.05/kWh tax. The national average price for electricity is $0.11.2/kWh, so this is also a 45% cost increase. Again, phase it in, subsidize upgrades, reduce taxes in other areas.

This is not drastic. Europe has gas taxes that are roughly double the cost of the fuel. The sooner we start, the sooner we send a price signal to invest in new technologies, in our homes and businesses to improve their efficiency. So if any of my elected representatives reads my blog, please tax my carbon.

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