Elon Musk says the No. 1 way to reduce carbon dioxide emissions would be to impose a tax on carbon.
“My best recommendation, frankly, would just be a carbon tax,” Musk told Joe Rogan on the Joe Rogan Experience podcast on Thursday. ‘The economy works great. Prices and money are just information … If the price is wrong, the economy is not doing the right thing. ‘
Currently there are no direct monetary consequences for companies and industries whose production emits greenhouse gases into the atmosphere; in other words, it is free to create greenhouse gases, of which carbon dioxide is the most abundant and pervasive. Carbon dioxide is released when fossil fuels, such as coal and gas, are burned. Excess carbon dioxide in the atmosphere traps heat and causes global warming.
Musk calls carbon concentrations in the atmosphere and the environment a “non-priced externality.” An externality occurs when a consequence of the production is not properly reflected in the market. In this case it is a negative externality.
A CO2 tax would change that. ‘As long as we put a price on it [carbon emissions], the market will react sensibly. But because we don’t have a price for it, it behaves badly, ”says Musk.
Musk proposed a tax on the point of consumption. (A consumption tax is one that is levied at the point of consumption, when someone buys something, where an income tax is one where you earn income or collect interest, capital gains, and the like, according to the Brookings Institution.)
He also suggested that the tax is “non-regressive,” meaning that the tax can be levied based on the income level. If a consumer with a “low income” has to use a lot of gas (and therefore emit a lot of CO2), he can get a “tax credit”, Musk said as an example. “That’s the way to do it.”
“This is clearly something that must be done,” said Musk.
Musk told Rogan that he had spoken with the Biden government about introducing a carbon tax. Musk said the government at the time said it seemed “too politically difficult.” A White House spokesman did not immediately respond to CNBC Make It’s’s request for comment.
But Janet Yellen, President Joe Biden’s appointee to head the Treasury Department, has expressed support for some carbon pricing strategy. “Carbon pricing” can refer to a carbon tax, an emissions trading scheme or a number of other funding mechanisms.
“We cannot solve the climate crisis without effective carbon pricing. The president supports an enforcement mechanism that requires polluters to bear the full cost of the carbon pollution they emit,” Yellen said in written responses to questions from the members of the Senate Treasury Committee in the United States. January were published. .
Of course, a carbon tax can give an electric vehicle company like Tesla an edge in the market. But according to Musk, “SpaceX would also pay a carbon tax,” he said. (Since rockets burn fuel that emits carbon dioxide when burned, all rocket companies would have to pay such a tax when they use jet fuel.)
The purpose of a carbon tax is to align market incentives with the transition from an economy dependent on fossil fuels to one that uses clean energy (energy that does not produce carbon emissions). And that, Musk says, is an existential necessity.
“The fundamental advantage of Tesla is how far it accelerates the rise of renewable energy. It’s inevitable. It’s tautological,” said Musk. “It’s either we have renewable energy or civilization is collapsing. And if civilization doesn’t collapse, we will have renewable energy, it’s just a question of how quickly that happens. The old days are better.”
The idea of a CO2 tax is not new. Opinions on this are divided.
“Elon is perfect. We need to push millions of people to change their behavior to reduce emissions by buying more fuel-efficient cars, adding more home insulation, moving us away from coal-fired electricity and a host of other changes,” said Gilbert E. Metcalf, an economics professor at Tufts University, tells CNBC Make It. “A carbon tax uses the power of markets to efficiently send a signal to consumers to implement those changes. In fact, a carbon tax is what gives Adam Smith’s Invisible Hand a green thumb.”
According to Richard Klotz, an environmental economist in the Department of Economics at Colgate University, “The prices of polluting goods / activities do not reflect their ‘real’ social costs. For example, the price you pay for gasoline does not include the damage that [carbon dioxide] from burning that gasoline to the climate, “he tells CNBC Make It.” So when we all make decisions about what to buy, we don’t have to consider environmental costs. Carbon pricing corrects this problem by making the pricing / commodity activities more accurately reflect true costs. “
However, others do not support a carbon tax.
A carbon tax will do nothing to prevent climate change, but it will harm the elderly, minorities, the poor and middle class and those on a fixed income the most because they spend a greater percentage of their income on energy and energy intensive goods the relatively wealthy, ”said H. Sterling Burnett, a Senior Fellow of environmental policy at the Heartland Institute’s free-market think tank, told CNBC Make It.
Indeed, paying for basic energy needs can often be a higher percentage of what a person with a lower income earns each month. And to make that pain more acute, “if you live in a substandard house that is not weathered, that is not energy efficient, that is poorly built or is older, then your energy tax will be greater,” Nathaniel Smith, Founder and Chief Equity Officer of the Partnership for Southern Equity, an Atlanta nonprofit, told Yale Climate Connections in 2019.
This, then, is the argument for a non-regressive carbon tax, as Musk pointed out in his conversation with Rogan. This idea is a non-starter, according to Burnett. “It can’t be non-regressive if it’s meant to change behavior. It has to hurt to work or people won’t change their behavior and stop using fossil fuels,” he says.
Even those who support a carbon tax say careful implementation is critical.
“Done right, and at the right level and without too many loopholes, it can be an excellent policy, but that’s a big deal,” said Michael Gerrard, an environmental attorney and professor at Columbia Law School. . “It should be combined, where necessary, with additional regulation and measures to counter any regressive impact on low-income people.”
So too, says Metcalf. “A carbon tax is not a panacea. We also need different policies,” he says, including more research and development spending to make carbon-free technologies cheaper. And with a CO2 tax, “the right price is the first task”.
According to Musk, the Paris Agreement is “just a piece of paper unless you do something about it,” he told Rogan. “It’s practically toothless.”
“One thing that matters: putting a price on carbon,” says Musk. “It’s the obvious move.”
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