It’s Crazy Not To Price Carbon

I often hear the refrain that renewables are expensive and only work because of government subsidies. That makes me nuts. The reality is that coal and gas are the beneficiaries of a subsidy that make it difficult for renewables to fairly compete, absent government support to level the playing field.

Here’s the thing. Fossil fuel generation is not required to pay for the cost of carbon and other pollution that is emitted into the atmosphere. For the most part, these power sources are granted the right to emit carbon (and other gases) into the public’s airspace without real encumbrance.

I wouldn’t sit in a locked garage with a running vehicle. That has a real and personal cost to it. Why would we think the same scenario at scale has no real societal cost?

These emissions are out in the open (literally) and we largely accept them, even though we know there are consequences. The NY Times attributed 6.5 million annual deaths to air pollution. There are new studies that link air quality to childrens’ mental health. Cities and countries have smoking habits that we know are not good for them.

Carbon emission without cost is a subsidy.

Short story, carbon emission without cost is a subsidy. Unfortunately, it’s an enormous subsidy that gambles with our health and the health of the world we are borrowing from our children. As Musk has often said, “Burning fossil fuels is the dumbest experiment in history, by far.

So, when I hear that renewables are the beneficiary of massive government subsidies, it frustrates me. The need for an Incentive Tax Credit or Production Tax Credit falls away if the cost of carbon is actually factored as a real cost of generation via coal and gas. (I’ll also argue that the ITC and PTC are prudent accelerants of strategic technologies, not subsidies, but potayto-potahto. We’ll let that go for the moment.)

Simply, we are not operating a transparent marketplace that requires the players to recognize and bear true costs. (Much like water in the central valley of California, but we’ll save that for another post.) That creates marketplace imbalances and disadvantages… while we sit like proverbial frogs in slowly boiling water.

A price on carbon emissions is a logical conclusion.

You don’t need to be MENSA to conclude that a price on carbon is logical. It’s been bandied about for years. Mostly it has been branded by opponents as a Carbon Tax, which has all kinds of political emotion behind it. If we’re going to brand it a tax, call it a Pollution Tax. That seems to balance the negative connotation of “Tax” more appropriately with an association that is tough to defend.

Regardless, a revenue neutral mechanism for pricing carbon makes most sense to me. Encumber the consequential behavior that we want to curb and provide relief elsewhere. I’m a fan of using proceeds to drive solutions via tax relief and incentives in strategic areas like clean energy, transportation, materials and manufacturing.

The common argument is that pricing carbon will kill jobs and hamstring the economy. I disagree. Of course, a lot depends on how the whole construct is introduced and managed, but on balance, that argument is simplistic and weak. I take a different view.

Pricing carbon will grow the economy and business opportunity.

A revenue-neutral pricing of carbon emissions will grow the economy and clean up our CO2 problem at the same time. Done right, it’ll also drag the rest of the planet along with us.

Yes, dirty manufacturing, oil-based shipping, transportation, internal combustion vehicles, and fossil fuel generation will increase their cost base. Looking on the positive side of the ledger, I’ll restate: The economic opportunity far outweighs these costs. We are talking about establishing the platform for Economy 2.0.

Constructed and managed properly, pricing carbon properly will drive…

  • Construction of the Enernet… new renewable generation and next generation energy infrastructure for a modern and resilient electric grid.
  • Powerful and impactful big data, analytics and measurement technologies and services.
  • Development and production of new environmentally-smart materials and manufacturing inputs.
  • Acceleration and scale production of EVs and autonomous vehicles.
  • Innovative financial instruments and robust new markets.
  • Development of new mass transit technologies.
  • Investment in new, clean shipping solutions and infrastructure.
  • New, clean, local manufacturing that uses new materials and requires little shipping. (I’m not sure why more attention isn’t focused on this one in particular. #jobcreator)
  • Upgrades abroad (using other countries’ $$) to clean up remote factories that effectively circumvent environmental restrictions domestically.
  • Investment and exploration of carbon harvesting technologies.
  • Massive research and development toward new breakthrough technologies in energy, materials, transportation and data sciences.

That sounds good to me and a basis for the next generation of economic growth and development. It’s a move Teddy Roosevelt would make. We raise the collective bar, seed a fair marketplace and demand the better selves that we can be. And that’s before recognizing the minor side benefit of maintaining a non-lethal place to live.

Yes, a price on carbon will introduce new and real expense for a number of incumbent businesses. Be that as it may, this is about creating a transparent and balanced marketplace where pollution is not economically encouraged. It is also about reinventing ourselves and growing business broadly, versus protecting profits of existing, big business at the expense of our collective well-being. It is about seeding new business opportunity by creating a fair environment where all parties are required to bear their real costs and the public is not asked to subsidize CO2 emissions with their health.

For those of you curious about the possible price of carbon… likely between $15 and $90/ ton. Peter Weisberg has a great post that goes into more detail.