A carbon tax is coming.

From a cynical point of view, political change comes about when a new group of people find a way to change the rules in such a way that they gain an advantage over previous champions.  The classic example is when once standard practice is deemed to be corruption, and the previous champions are thrown in jail, leaving space for the reformers.  Without calling the previous champions corrupt, I think we are about to see this happen in a big way to big energy.

Renewable energy has come a long way, but until recently, its been a side-show to carbon or nuclear, the fuels of choice for serious work. The idea of a carbon-tax has been (with the exception of the Northeast) somewhat anathema to US politics, and we seem unwilling to underwrite long-term tax incentives for carbon replacement. Too many jobs, too much of our economy is tied into carbon based fuels for a serious change in the value of carbon to take place. I think that is about to change.

Green Car Congress has an article that talks about the potential for a new wind farm in Wyoming to fuel Los Angeles. This proposed wind farm is massive. At 2,100 megawatts, it would be more than 3 times the size of the proposed Susitna-Watana dam. From there, the power would be sent to Utah, where a compressed air battery would stabilize the wind resource, and make it available for peak demand in California.

This is where I see the game start to change. The scope of the project directly affects jobs in 3 states. A fourth state, Texas, is the home to Dresser-Rand, manufactures the equipment for the compressed air batteries, and the turbines will be produced by GE, (Connecticut), meaning this project touches 10% of the Senate districts in the nation. While I am not going to argue that Senators from Texas or Wyoming will become hostile to oil, I do think that such large projects will insure that they become friendlier to the advantages of wind energy (although it must be said that Texas generates more power from wind than the next two states combined).

While fracking still provides a carbon-based fuel, natural gas releases less carbon per kWh than more traditional fuel sources. As more natural gas is used, the overall cost to industry of a carbon tax will decrease.

I predict that between this decrease in overall relative cost of the carbon tax, along with environmental advocates pushing for a carbon tax, will create an opportunity for a new group of people to change the rules to gain an advantage over their predecessors.

A carbon tax would lead the way for energy contractors and developers to profit off of rebuilding our generation infrastructure from the ground up. I suspect this will happen sooner rather than later.

Author: Kevin

2 thoughts on “A carbon tax is coming.

  1. I fail to see how a carbon tax is a logical outcome of successful renewable energy projects.

    A carbon tax seems to logically serve two purposes: 1 – to provide a financial incentive for people and businesses to make energy decisions that are less damaging to the environment, and 2 – to level the playing field in energy cost between carbon-based fuels and more renewable resources.

    My 3rd purpose would be to try to recoup some of the costs of the externalities associated with fossil fuel extraction – the huge public costs of spill cleanup, site remediation, and climate change. But this does not seem to be in the public discourse much.

    There are also 2 main objections to a carbon tax: 1 – that increasing the cost of energy via a carbon tax will be a (job killing) drag on the economy, and 2 – that all taxes are evil because all government is evil.

    These counter-arguments to a carbon tax are pretty shallow, but if your world view is based on Fox News and you don’t realize the role carbon plays in climate change, or that government has a useful role in a market economy, then these reasons are more than enough.

    Within a rationale framework like that, I fail to see how the wind farm will make a difference. Yes, it will be adding jobs and value to the economies of 5 states. But it is a project being discussed in the absence of a carbon tax, and whose economics must make sense without a carbon tax, else companies like Duke Energy wouldn’t be kicking its tires.

    1. A tax on externalities is a relatively “clean” way for the government to affect the market. Proponents of the tax will say that the tax would serve to fix a place where the market is broken, which is the only time the government should ideally get into the market. As such, I would argue that your point 3 is THE valid reason for the tax, and 1 and 2 are simply the practical offshoot of the market system working, when all costs are accounted for.

      That being said, a tax is still a political act. Adding a new tax is not a popular measure, it requires a strong political constituency. Whether or not you think a carbon tax would level the playing fiend or distort it, it would create a new group of winners who would benefit monetarily from the tax. The money to be had from new development (the sale and manufacture of large-scale manufactured goods in some states, the instillation and maintenance of said goods in others), will start to balance the current constituency that is heavily invested into the status quo. That will, I think, give the rest of the carbon tax backers the room they need to operate to push the tax thorough.

      It is probably time for us to start thinking that it is an inevitable reality going forward. Among other things, the ramifications of this for our state is fairly grim. Peak Oil theory is looking less accurate than it did even 10 years ago as we find more ways to Shale oil is opening up new swaths of previously unusable reserves, and new technology is able to get previously unusable oil out of old wells. While we will, obviously, at some point run out, that date is being pushed further and further into the future, which means that as Alaska’s supplies start to dwindle, we can’t expect that declining production will be balanced by increasing price.

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