Elon Musk says the number one way to cut carbon dioxide emissions would be to levy a carbon tax.
“My main recommendation, honestly, would just be to add a carbon tax,” Musk told Joe Rogan on The Joe Rogan Experience podcast on Thursday. “The economy works very well. Prices and money are just information … If the price is wrong, the economy will not do the right thing.”
Currently, there are no direct monetary consequences for companies and industries whose production releases greenhouse gases into the atmosphere; in other words, it is free to create greenhouse gases, the most common and widespread of carbon dioxide. Carbon dioxide is released when fossil fuels, such as coal and gas, are burned. Excessive carbon dioxide in the atmosphere retains heat and causes global warming.
Musk calls the concentrations of carbon in the atmosphere and in the environment a “priceless externality”. An externality occurs when some consequence of production is not adequately reflected in the market. In this case, it is a negative externality.
A carbon tax would change that. “If we just put a price on [carbon emissions], the market will react sensibly. But, as we don’t have a price, he is behaving badly “, says Musk.
Musk suggested a tax at the point of consumption. (A consumption tax is one levied at the point of consumption, when someone buys something, where an income tax is one in which you earn income or collect interest, capital gains and the like, according to the Brookings Institution.)
He also suggested that the tax be “non-regressive”, which means that the tax could be levied based on the level of income. If a “low-income” consumer needs to use a lot of gas (and therefore produce a lot of carbon emissions), he could get a “tax cut,” said Musk as an example. “That’s how it’s done.”
“This is obviously something that should happen,” said Musk.
Musk told Rogan that he talked to the Biden administration about implementing a carbon tax. According to Musk, at the time, the government said it seemed “politically too difficult”. A White House spokesman did not immediately respond to CNBC Make It’s request for comment.
But Janet Yellen, appointed by President Joe Biden to head the Treasury Department, has indicated her support for some kind of carbon pricing strategy. “Carbon price” can refer to a carbon tax, an emissions trading system or any other financing mechanism.
“We cannot resolve the climate crisis without effective carbon pricing. The president supports a monitoring mechanism that requires polluters to bear the full cost of the carbon pollution they are emitting,” said Yellen in written responses to questions from members of the Senate Finance Committee published in January. .
Of course, a carbon tax could give an electric vehicle company like Tesla an advantage in the market. But, according to Musk, “SpaceX would also be paying a carbon tax,” he said. (Since rockets burn fuel that emits carbon dioxide when it is burned, all rocket companies would have to pay this tax when they consume jet fuel.)
The purpose of a carbon tax is to align market incentives for the transition from an economy that depends on fossil fuels to one that uses clean energy (energy that does not produce carbon emissions). And that, says Musk, is an existential need.
“Tesla’s fundamental asset is the extent to which it accelerates the advance of sustainable energy. It is inevitable. It is tautological,” said Musk. “Either we have sustainable energy or civilization collapses. And if civilization doesn’t collapse, we will have sustainable energy, it’s just a matter of when it will happen. The sooner, the better.”
The idea of a carbon tax is not new. Opinions are divided on the subject.
“Elon is right. We need to get millions of people to change their behavior to reduce emissions by buying more economical cars, adding more thermal insulation, moving away from coal-fired electricity and a number of other changes,” Gilbert E Metcalf, professor economics at Tufts University, told CNBC Make It. “A carbon tax uses the power of markets to efficiently send a signal to consumers to make these changes. In fact, a carbon tax ensures that the Invisible Hand of Adam Smith has 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 your ‘true’ social costs. For example, the price you pay for gasoline does not include the damage that [carbon dioxide] of the burning that gasoline causes to the climate, “he told CNBC Make It.” So when we all make decisions about what to buy, we don’t have to consider the environmental cost. Carbon pricing corrects this problem by ensuring that prices / activities of goods more accurately reflect real costs. “
Others, however, 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 the middle class, and those with a fixed income, because they spend a greater percentage of their revenues on energy and energy-intensive goods. energy than the relatively wealthy, “H. Sterling Burnett, senior environmental policy researcher at the free market think tank Heartland Institute, told CNBC Make It.
In fact, paying for basic energy needs can often represent a higher percentage of what a low-income person earns each month. And, to make the pain more acute, “if you live in a substandard house that is not heated, that is not energy efficient, that was poorly built or that is older, then your energy load will be greater” , Nathaniel Smith, the founder and Chief Equity Officer, of Partnership for Southern Equity, a nonprofit organization in Atlanta, told Yale Climate Connections in 2019.
This, then, is the case for a non-regressive carbon tax, as Musk outlined in his conversation with Rogan. That idea is a failure, according to Burnett. “It cannot be non-regressive if it is intended to change behavior. It must hurt to work, otherwise people will not change their behavior and stop using fossil fuels, ”he says.
Even those who support a carbon tax say that careful implementation is critical.
“If done right, and set at the right level and without a lot of loopholes, it can be an excellent policy – but it is a big if,” says Michael Gerrard, an environmental lawyer and professor at Columbia Law School. “It needs to be combined with additional regulations where necessary and measures to counteract any regressive impacts on the poor.”
Similarly, says Metcalf. “A carbon tax is not a magic cure. We need other policies as well, ”he says, including increased spending on research and development to make zero-carbon technologies cheaper. And with a carbon tax, “setting the 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. “He’s practically toothless.”
“One thing that would matter – put a price on carbon,” says Musk. “It’s the obvious move.”
See too:
This start-up supported by Bill Gates and Jeff Bezos aims to produce almost unlimited clean energy
Emissions from fossil fuels responsible for 1 in 5 premature deaths: Harvard report
Who, what and where Elon Musk’s $ 100 million prize for innovation in carbon capture