Benefits of the Carbon Tax

By Michael Pasternak (ME ‘17)

You may have heard of the Carbon Tax as a proposed solution to climate change. What you may not have heard is that, among economists, it’s the preferred solution to climate change. According to a report from The Institute for Policy Integrity at the New York University School of Law from 2015, 77% of economists with relevant publications answered that the US should cut its emissions no matter what actions other countries take, while another 18% said that American emissions cuts would be warranted if many or all other countries commit to reducing theirs. The recent Paris agreement, which established climate mitigation goals with 180 countries, including China and the US, within reason, would satisfy “many or all other countries committing to reducing theirs.” This amounts to an effective 95% of economists with knowledge of the energy economy “supporting action on the climate.” The survey also asked the experts about the most economically efficient method of reducing carbon pollution. Eighty-one percent said a market-based system (carbon tax or cap and trade system) would be most efficient, while 13% answered that coordinated performance standards and programs that prioritize cleaner fuels and energy efficiency would be most efficient.

So why a carbon tax? Simply put, it’s the free market response to hidden costs.

Carbon pollution does cost a lot of money to America, coal pollutants in general even more on top of that. For example, an article in Forbes from 2012 states that, controlled for amount of energy produced, coal is directly responsible for one hundred thousand times more deaths than nuclear, which is the least deadly form of energy in their analysis, closely followed by hydroelectric. A carbon tax is a direct acknowledgement of the reality of the situation, that coal and oil are actually hugely subsidized right now, since the costs of cleanup and health outcomes far outweigh the cheaper energy. A carbon tax simply allows the market to correct for it so that rather than pay for huge oil spills and catastrophic climate change, we’d promote sources of energy without those massive drawbacks.

It’s also worth noting that on a cost basis a carbon tax is almost certainly a pro-nuclear policy. In the US, coal power is followed by nuclear power quite closely in cost per unit of energy produced. In Europe, nuclear energy is actually cheaper than coal. That’s mostly because in Europe many more plants of the same type are built, and at a higher density. Specifically, France is very good at building nuclear plants quickly and cheaply because they are a primarily nuclear energy state. It would be completely reasonable to assume the same process would occur in the US if we follow in the footsteps of Europe and impose a carbon tax on the energy sector.

So why haven’t we? There’s a number of reasons. The first is that our country has an undue amount of influence imposed by moneyed interests, and there’s simply a lot of money already invested in oil and coal. This has led to opposition to renewables from the Right and opposition to nuclear from both sides of the aisle. The Carbon Tax, despite being the single most mainstream economic idea to address climate change, was only proposed by two major politicians in recent memory, Bernie Sanders (whom I believe we all know) and Bob Inglis. Inglis, a Republican, is famously splitting from his party in supporting a “revenue neutral” Carbon Tax. What that would mean is that any proceeds from the tax would be given back to the citizenry through tax rebates for low income farmers, truckers etc. who would feel increased prices in fuel very sharply but may be less able to field those costs. That, I believe, is the reasonable conservative response.

Other critiques of the tax, such as the idea that businesses will simply leave and go to countries without any tax on carbon, simply haven’t been borne out in Europe where carbon taxation already exists. In fact, most analyses show Europe’s energy economy booming following their aggressive response to climate change mitigation. Particularly in France and Denmark, nuclear has essentially replaced coal in baseload generation with renewables providing variable generation to fill in the gaps. There’s a conversation that should be happening about the particulars of the tax, but it’s very clear that in terms of quickly and
effectively addressing the problem, it’s the ideal solution.

So what’s next? We need to pressure our leaders to support nuclear and renewables either through a carbon tax or whatever else our “greatest political minds” can come up with. Sometime in the next couple of weeks (I’ll make sure it’s on Facebook) I will be leading a letter writing campaign on behalf of the New York chapter for the volunteer advocacy group NAYGN (North American Young Generation in Nuclear). Read the letter, and if you agree, sign it! It shows local lawmakers that people actually do care about this stuff and could lead to more positive action like the recent subsidy on nuclear generation in New York state, pushing the conversation towards carbon-free sources of power generation. ◊

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