For years, the notion of building the “price” of carbon emissions into the real-world economy via a carbon tax has been a controversial issue, as many new taxes tend to be. Earlier this month, fossil fuel giant ExxonMobil surprised many by lobbying for a “revenue neutral” carbon tax.
But the debate rages on, with many preferring to use the carrot of increased energy subsidiesover the stick of a carbon tax.
Recently Tesla Motors CEO Elon Musk discussed both subsidies and a carbon tax while speaking in Nevada. Musk, who already benefits from plenty of green subsidies also made the pitch for a carbon tax, but he began by making the argument that climate change itself is a type of subsidy.
“If you accept the scientific consensus every oil burning activity is subsidized, dramatically. If you believe there is a value to the CO2 capacity of the atmosphere and oceans and that CO2 capacity is not being paid for by the price at the gas pump or the coal that is being burned for electricity generation or whatever its use may be then every single fossil fuel burning activity is massively subsidized.”
Musk goes on to argue that a carbon tax is actually necessary to balance out this “hidden subsidy.”
“If you ask any economist they will tell you that is the obvious thing to do, put the correct price on carbon because we currently have an error in the economy which misprices carbon at zero or something closer to zero. It is a fundamental economic error.”
This is all familiar setup for many, but then Musk really gets down into the weeds to explain why intervention in the form of a carbon tax is something that even a Libertarian should be able to get behind.
“They (Libertarians) are actually opposed to government intervention because it causes false pricing. If the government says we are going to massively incent the production of corn, so that effectively corn gets mispriced and we make too much corn, that actually then does not benefit the country if you make too much of something because of a government driven pricing error. That is bad for people. That is sort of what people with a libertarian bent are opposed to.”
Typically not a good rhetorical strategy to tell people why they believe what they do, but go on…
“However if you have something where you have an unpriced externality so that you have the case of the CO2 capacity of the oceans and atmosphere priced very close to zero then any government action to increase the price above zero reduces the error in the economy. I’m getting sort of esoteric in economics here, so what they should actually be opposed to is anything that increases the error in the economy, a pricing information error. So pricing carbon, if you believe in global warming, does not increase the price of the error it decreases the price of the error.”
There’s plenty of logic in the argument, although Libertarian Presidential candidate Gary Johnson, who thinks climate change is “probably” real and influenced by human activities, still sees no place for a carbon tax to correct the problems Musk sees in the economics of the climate. When you hear Johnson speak to the issue, he holds firm in his belief that the magic of free markets will somehow make all things right.
Perhaps Johnson has the idea half right, he just needs to actually listen to what the market wants. And some of the biggest movers and shakers in the market, including Musk and Exxon, now say they want a carbon tax.