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Does a Carbon Tax make sense? Minnesota Judge suggests cost of carbon could be 10x more than previously thought

Factory with air pollution

A judge in Minnesota suggested that the proper price of the greenhouse gas Carbon Dioxide should be between $11 and $57/ton, ten times larger than current Minnesota estimates. A judge in Washington State recently ruled that the threat of climate change is so urgent that the state must be placed on a court-ordered deadline to hold polluters accountable now. Politicians, Scientists and Economists are all seeming to focus on an Economics style solution to climate change. Are we on the cusp of energetic changes from a legal standpoint?

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Globally, carbon taxes are in place in many countries. The taxes range in application and price, for instance in Great Britain gasoline gets just less than $.01/gallon of gas. In Sweden – if the CO2 is generated for non-electricity purposes the costs are $150/ton (three times the Minnesota recommendation). British Columbia instituted a carbon tax that increased by $5/ton in 2008 to $30/ton in 2012. Politicians are debating increasing to to $40/ton. In the US, California’s current carbon tax pricing is around $12.50/ton. The hard numbers in California means a family that uses 10,000 kWh a year of dirty power will pay $100 a year, and if they drive 12,000 miles a year getting 30mpg they can expect $44 a year at the pump – less than $150 a year to contribute to cleaning up their fossil fuel related pollution. My rough math on the Minnesota carbon tax says that would cost between $.01 and $.07/kWh depending on where that electricity comes from. Massachusetts’ SREC value – the state level carbon tax paid for by the utilities to solar power producers  – is $.28/kWh.

US Democrat Presidential Candidates Hillary Clinton and Bernie Sanders both say CO2 is serious issue – Bernie believes in pushing a carbon tax hard (along with also stating that climate change is the planet’s greatest challenge), while Hillary feels the Obama initiated Clean Power Plan is a pretty solid program, and realistically, all that can be done in our current political climate.

The US Energy Information Association, in a 2010 study, stated that a $15-25/ton tax would lead toward an expansion of nuclear power and a collapse of coal. Interestingly, without a carbon tax the US has seen coal fall to 29% of electricity – and headed downward due to the extremely low costs of natural gas. Unfortunately, without a carbon tax the US has also seen clean nuclear power get undercut in pricing by natural gas, and without nuclear power we might not be able to meet the goals of the Clean Power Plan.


Many economists believe that a revenue neutral carbon tax would be the best tool to meet our needs – it would increase the price of polluting energy sources while not hurting individuals financially because the tax is returned to consumers. Even Elon Musk has asked for this structure of climate protection. Vlad Gutman says that a revenue neutral tax isn’t enough – “We’ve waited too long, and it is now necessary that the revenue from this tax instead goes toward upgrading our infrastructure, investing in clean energy sources, making our building more efficient and pushing our agriculture into the 21st century.” Of course, there are some groups in the US (and others) feel a government administered program wouldn’t meet environmental goals – and would destroy the economy while doing so, as such a tax in any way would be a non-starter.

Air Pollution

recent analysis by the IMF calculated that Fossil Fuels receive $5.3 trillion/year on a global scale in the form of direct subsidies, tax breaks and ignored costs of things like pollution, health and climate change (externalities). In the US, that number computes to about $700 billion a year – an amount equivalent to $2,200 per year, per individual. Investment bank Citigroup feels the cost of not acting on Climate Change will cost the global economy $44 trillion. Even Exxon says a carbon tax is needed and, according to The Economist, they’ve built a shadow price into their annual analysis just in case.

We cannot simply write Climate Change off like we’re doing accounting. There is no restructuring court when you go bankrupt with the Earth. Spring arrived ten days early. The US Defense Department told Congress last year that “global climate change will aggravate problems such as poverty, social tensions, environmental degradation and that threaten stability in a number of countries with ineffectual leadership and weak political institutions.” With the Arctic Ice caps thinning and Greenland and the North Pole above freezing at the New Year – this judge seems to be onto something. In a few decades, cents per kWh today may seem very small in comparison to giving away New York City, Miami and Washington DC to Poseidon the God of the Seas and Ocean Rise.

Audio from MPR 

Image via Solar Industry mag

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