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A really bold version of a carbon tax, then, would extend to agriculture, especially the livestock sector. Removing carbon from the air and sequestering it or recycling it as fuel could potentially have a huge impact on climate change.
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It can be done, but with current methods it is costly. However, there are new methods on the horizon that could bring the cost of direct air capture down substantially. Those technologies could get an immediate boost from a carbon tax that worked both ways — you pay the government if you emit, the government pays you if you sequester. Even if the carbon tax itself were initially below the cost of carbon sequestration, you could jump-start removal by offering a premium rate for removal for a limited period. The removal process would be profitable immediately, and as the technology matured, costs would drop enough to keep it going without the bonus.
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An aggressive carbon tax would make it uneconomical to construct new fossil-fuel power plants while encouraging purchase of more efficient airliners and automobiles. However, both industrial managers and consumers would ignore the sunk costs of previously purchased equipment when deciding whether to continue operating what they already have. Based on fuel costs alone, obsolete vehicles and factories might remain in service for years.
To handle that problem, part of the revenue from a carbon tax could go into a buy-back program to accelerate the retirement of old, emission-intensive equipment. The above proposals have a one key feature in common: They are all tech-neutral. It is easy to underestimate the difficulty of picking winners from among the wide spectrum of new green technologies that are being pursued. When there is no way to know what will work, it makes more sense to offer modest but equal incentives for all alternatives through a tech-neutral mechanism like a carbon tax than to guess which competing fix might work best.
A broad, tech-neutral incentive would also help defuse the danger of opening the choice of winners to influence by special interests. At the same time, it would reduce the risk that that dead ends would never be abandoned, even when they are shown to have failed. The Renewable Fuel Standard, which mandates the use of corn-based ethanol as a motor fuel, is a classic case in point.
Environmentalists fell out of love with ethanol long ago, but agribusiness has not.
In contrast, putting a price on carbon emissions is the ultimate in tech neutrality. A price signal would provide unbiased, neutral pressure across the full spectrum of potential methods for cutting emissions. It could be dialed up or down depending on your assessment of the urgency of the climate threat.
It could be implemented narrowly to cover fossil fuels only or broadly to encompass industrial sources, farming, carbon removal, and anything else you want to include. Addendum: On Feb. The GND resolution does not explicitly call for a carbon tax, but it does include a placeholder that could easily be filled by such a tax. Specifically, Sec. However, there appears to be some difference of opinion within the GND camp about the importance of such a tax. By Ed Dolan.
If you think a carbon tax is not enough, raise it The most obvious action for those who think that a carbon tax is not enough is to raise the rate. Broaden the tax Many proposals limit carbon taxes primarily to fossil fuels. A two-way carbon tax to reward carbon removal Removing carbon from the air and sequestering it or recycling it as fuel could potentially have a huge impact on climate change.
- A Carbon Tax Should Be the Centerpiece of the Green New Deal - Niskanen Center?
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