How to do a carbon tax right
The stated aim of carbon pricing is to promote a reduction in dependence upon carbon emitting products and services.
But, the problem is a simple one. There are no alternatives in many cases, and where there are alternatives, the taxes aren't fairly applied.
I generally tend to agree; an modest increase in gas prices has relatively little effect on fuel consumption. The average person puts the most mileage on their vehicle going to work and performing other necessary activities. Also, gas prices now, even with carbon pricing aren't the highest they've ever been.
The amount of wiggle room available for discouraging fuel consumption is low.
But, if new ICE vehicles are taxed reasonably. Say, the greater of 10% or $2500, and those funds are used to help subsidize hybrids, plug-in hybrids, electric vehicles even more than the current program? Then I think progress can be made. And, reasonably fast.
If all new cars which aren't at least a hybrid have their base costs artificially inflated by such a tax, then the gap in price shrinks. Then, if you offer, say $2500 for hybrids, $5000 for plug-in and $10k for EVs... then all of a sudden more fuel efficient cars become suddenly become negligibly closer in cost to the end consumer.
Low income households won't pay a carbon tax on the fuel they need, and can stick to used vehicles. Or, a special category of vehicles may be made exempt to assist low income families (let's say ICE cars under $15k meeting certain fuel economy standards).
Cutting down how much the average person needs in fuel for those trips they can't eliminate is going to have a much higher impact on our carbon emissions than simply raising the cost of gas.
And then there is every other sector. In many, we rely on carbon emitting products and services with little to no option. In those cases costs are increased with no possible remedy, or no feasible one. For instance, where I am forced air heating is the norm. And this is supplied by LNG. It is cleaner than gasoline, but still a carbon emitter. And a large scale one.
There are electrical and hot water based alternatives, but that would simply pressure the grid, and there is no guarantee that energy is cleaner than LNG. But worse, the cost to homeowners is so high it will never happen. For widespread, short term adoption it would require existing households, in large numbers to take up the torch though.
Pricing carbon in those sectors is a no-win scenario. Heating and cooling are requirements for health and safety. Sure, some people over heat or over cool. But, again, sizable reductions require real gains across the board.
If you're going to charge us for carbon emissions, don't hand the money back. At least invest it in programs to help retrofit or into innovation funds. New houses need new standards. But, we don't buy new houses at the same rate we change cars. It takes a VERY long time for new builds to displace existing ones as the primary contributor to these things. So planning here needs to be retroactive to existing builds.
Personally, on most household improvements, between government incentives, consumer buy-in and a vested interest from utility companies it might be possible to work something out today.
Imagine this: your hydro provider offers to throw free solar panels up and hook up a battery or other backup storage system. For free. Why? Well, firstly, they'll take all the energy they pump into the grid which helps them. With some government money, they get a quicker ROI on the investment than they would without it. But why would you allow it? As a part of the program, 20% of the stored energy is reserved for the home owner. And will provide you with up to an hour of power during a black out. Not great. But not bad for something free.
The hydro company then uses their 80% of the battery to allow them address spikes in the grid, and also, allows them to intermittently feed your house entirely from the battery, at normal metered rates, while reducing the load on the grid.
And, on top of that you can buy-in and get more panels which then WILL be factored into your bill, and additional storage capacity which you can control how it is used; like offsetting your peak time of use billing or extending your emergency backup.
If even just 10% of houses bought in, it could allow utility companies to lessen their dependence on more expensive 3rd party energy purchases. It could extend the life of the infrastructure by giving them the tools to limit the load at critical times.
The utility company would actually recoup the investment in such technologies faster than you ever could. So, with little or even no government incentive, such an approach might actually make sense.
I'm not suggesting that the whole grid could work this way. But, between 5-25% market penetration would provide a lot of value to utilities and could pave the way for financing a lot of innovation in that area.
By and large, I think what I'm saying is that; in sectors where there is a well defined solution to the problem (like automotive), it needs a custom tailored approach. In other areas, carbon pricing either needs to be eliminated, or the funds need to be directed to into research, or into delivering those solutions to the market in the most efficient way possible.
Eliminating carbon pricing may sound like a step backwards. But, by that, I really mean fund the research out of tax dollars, which likely means increasing taxes. Which really just means a less direct carbon tax. But, by removing the direct taxation from carbon it may make the pill easier to swallow for the average person.
But, the problem is a simple one. There are no alternatives in many cases, and where there are alternatives, the taxes aren't fairly applied.
I generally tend to agree; an modest increase in gas prices has relatively little effect on fuel consumption. The average person puts the most mileage on their vehicle going to work and performing other necessary activities. Also, gas prices now, even with carbon pricing aren't the highest they've ever been.
The amount of wiggle room available for discouraging fuel consumption is low.
But, if new ICE vehicles are taxed reasonably. Say, the greater of 10% or $2500, and those funds are used to help subsidize hybrids, plug-in hybrids, electric vehicles even more than the current program? Then I think progress can be made. And, reasonably fast.
If all new cars which aren't at least a hybrid have their base costs artificially inflated by such a tax, then the gap in price shrinks. Then, if you offer, say $2500 for hybrids, $5000 for plug-in and $10k for EVs... then all of a sudden more fuel efficient cars become suddenly become negligibly closer in cost to the end consumer.
Low income households won't pay a carbon tax on the fuel they need, and can stick to used vehicles. Or, a special category of vehicles may be made exempt to assist low income families (let's say ICE cars under $15k meeting certain fuel economy standards).
Cutting down how much the average person needs in fuel for those trips they can't eliminate is going to have a much higher impact on our carbon emissions than simply raising the cost of gas.
And then there is every other sector. In many, we rely on carbon emitting products and services with little to no option. In those cases costs are increased with no possible remedy, or no feasible one. For instance, where I am forced air heating is the norm. And this is supplied by LNG. It is cleaner than gasoline, but still a carbon emitter. And a large scale one.
There are electrical and hot water based alternatives, but that would simply pressure the grid, and there is no guarantee that energy is cleaner than LNG. But worse, the cost to homeowners is so high it will never happen. For widespread, short term adoption it would require existing households, in large numbers to take up the torch though.
Pricing carbon in those sectors is a no-win scenario. Heating and cooling are requirements for health and safety. Sure, some people over heat or over cool. But, again, sizable reductions require real gains across the board.
If you're going to charge us for carbon emissions, don't hand the money back. At least invest it in programs to help retrofit or into innovation funds. New houses need new standards. But, we don't buy new houses at the same rate we change cars. It takes a VERY long time for new builds to displace existing ones as the primary contributor to these things. So planning here needs to be retroactive to existing builds.
Personally, on most household improvements, between government incentives, consumer buy-in and a vested interest from utility companies it might be possible to work something out today.
Imagine this: your hydro provider offers to throw free solar panels up and hook up a battery or other backup storage system. For free. Why? Well, firstly, they'll take all the energy they pump into the grid which helps them. With some government money, they get a quicker ROI on the investment than they would without it. But why would you allow it? As a part of the program, 20% of the stored energy is reserved for the home owner. And will provide you with up to an hour of power during a black out. Not great. But not bad for something free.
The hydro company then uses their 80% of the battery to allow them address spikes in the grid, and also, allows them to intermittently feed your house entirely from the battery, at normal metered rates, while reducing the load on the grid.
And, on top of that you can buy-in and get more panels which then WILL be factored into your bill, and additional storage capacity which you can control how it is used; like offsetting your peak time of use billing or extending your emergency backup.
If even just 10% of houses bought in, it could allow utility companies to lessen their dependence on more expensive 3rd party energy purchases. It could extend the life of the infrastructure by giving them the tools to limit the load at critical times.
The utility company would actually recoup the investment in such technologies faster than you ever could. So, with little or even no government incentive, such an approach might actually make sense.
I'm not suggesting that the whole grid could work this way. But, between 5-25% market penetration would provide a lot of value to utilities and could pave the way for financing a lot of innovation in that area.
By and large, I think what I'm saying is that; in sectors where there is a well defined solution to the problem (like automotive), it needs a custom tailored approach. In other areas, carbon pricing either needs to be eliminated, or the funds need to be directed to into research, or into delivering those solutions to the market in the most efficient way possible.
Eliminating carbon pricing may sound like a step backwards. But, by that, I really mean fund the research out of tax dollars, which likely means increasing taxes. Which really just means a less direct carbon tax. But, by removing the direct taxation from carbon it may make the pill easier to swallow for the average person.
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