The $40 Carbon Tax Is Dead as a Doornail, and Here’s Why

by Jim Lane (Biofuels Digest) This past week, a group headed by former Secretaries of State George Shultz and Jim Baker proposed dramatically to introduce a $40 per ton carbon tax in order to address the rising threat from global warming.

The good news is that the proposal comes at the onset of a Republican Administration and comes from former high-level Republican officials.

The bad news is that $40 per ton won’t get the job done, not even close. You need $120 per ton — and not later, now — to transform the alternative fuels market. And don’t think that $120 will get the job done in shifting the nation dramatically to electrics. For that, you’ll need something like $600 per ton.

And, yes, the Secretaries and their friends proposed that the carbon tax would rise over time. But we don’t need a tax that will bite in 2045, that doesn’t fund innovation. Real companies need profits now.

Aha, you tell me, I’ll buy an all-electric zero emission vehicle. None of this food-chomping, engine-corroding renewable fuel for me! you say.

Remember, if all you get is $40 per ton in that carbon tax, say goodbye to your $7500 tax credit for purchasing an electric car. That credit means everything. Based on the average number of miles that Americans drive, it adds up to $1.33 per gallon over a 10-year period that you are likely to own that vehicle.

Now, what do you get from the carbon tax? The US is not all wind, solar, hydro and biomass — and there are emissions for electricity. According to this neutral source, overall, there’s gives a 33% carbon benefit driving a “zero emission” electric vehicle compared to driving a conventional vehicle.

So, your current tax credit is worth the same as a carbon price of $417 per ton. That’s the math.

And don’t think that, despite a gaudy load of publicity for electrics, sales have been exactly jumping off that charts. It’s true the American’s bought 150,000 more electric cars in 2016 than in 2011. But they are buying nearly 5 million more non-electrics than in 2011. For every extra electric on the road, there’s been 30 gas-guzzlers purchased by us all.

And that’s with a $417 carbon price via the tax credit. And that’s not taking into account that California is where most electrics have been sold and, in California, there’s another $80 added to the carbon price via the Low Carbon Fuel Standard.

That’s why it will probably take a $600 carbon price to make electrics move in today’s market in climate-changing numbers. Simply because they’re sold only in boutique numbers for a $497 carbon price.

So what should nations do?

One, sit back and enjoy and enforce the standards already there. They are working to transform the fuel mix in the US, right now. And the good news is that, increasingly, these are proven technologies that can now be routinely deployed where the project economics add up. It’s more about carbon footprint, feedstock availability and infrastructure than about technology risk. More and more.

Two, put in more LCFS standards, and extend them to aviation. That way, there’s renewable jet fuel for airlines who need it, and more and more renewable diesel for heavy-duty transport for which battery technology is currently ill-suited.

But let’s put the $40 per ton carbon tax right where it belongs. It’s not to say that the idea isn’t worth the paper it’s written on. It’s worth exactly the value of the paper it’s written on — as a feedstock ready for transformation from something noble and useless into something noble and useful — into renewable fuels, that is. READ MORE and MORE (The Washington Post) and MORE (The New York Times) and MORE (Renewable Energy World)

Excerpt from The Washington Post: But the prospect of dismantling the Obama administration’s climate rules did not sit well with the Natural Resources Defense Council, a leading environmental group. The council said Wednesday that it would not support a regulatory rollback in exchange for a carbon tax, underscoring the difficult politics behind the idea.

“Putting a price on carbon could be an important part of a comprehensive program,” Rhea Suh, the group’s president, said in a statement. “It can’t do the job alone, though, and is not a replacement for carbon limits under our current laws.”

There’s also the question of whether the current White House is up for big, wonky crossover ideas — especially when recent polling suggests that only a small fraction of Trump voters even believe in human-caused climate change.

Still, Baker said, the idea “gives Republicans a seat at the table on an important issue and does so in keeping with Republican principles.” READ MORE