Alternatives to Carbon Tax: Will They Work?

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Carbon Tax Alternatives

Many solar proponents feel strongly about the benefits of carbon taxes. However, not everyone agrees that this tax best promotes renewables, such as solar energy. Before diving into other options, let’s look at carbon taxes. Understanding what carbon taxes do and why they receive pushback will help us better understand why pro-renewable states should consider other alternatives. 

Why Carbon Taxes Need an Alternative: Pros and Cons

Carbon dioxide is a major contributor to greenhouse gases. As of 2018, carbon dioxide gases composed 81 percent of the greenhouse gases produced in America. A carbon tax imposes a tax on fossil fuels with high carbon content. These fuels include coal, diesel, gasoline, propane, and natural gas. Fuels that produce more carbon dioxide when burned receive a higher tax to encourage consumers to reduce demand and use of the fuel type. The revenue from the carbon tax typically either redistributes back to the public to reduce hardship, or it goes toward renewable infrastructure. However, the implementation of these two redistribution techniques varies.

Carbon Tax Benefits

A carbon tax can successfully force people to move toward greener options. It accomplishes this task by making fossil fuels more expensive to purchase, which in turn makes renewables less expensive.

Downsides of the Carbon Tax

While good in theory, the individuals who don’t have the means to purchase a fuel-efficient car or have other blockades to adding renewable power like residential solar also have to pay this tax. These individuals become stuck paying more for their livelihood. The other con to a carbon tax comes from alternative option prices staying the same, which means, in general, life becomes more expensive for everyone. 

Do Carbon Taxes Work?

While theoretically, carbon taxes reduce energy consumption, the rate that it helps varies. In 2019, Gilbert E. Metcalf of Tufts University wrote a paper that addressed the impact of carbon taxes on countries that have implemented this solar policy. He found that tax rates have ranged from less than a dollar to $139 per ton. 

Not surprisingly, Metcalf also found that the impact of these differing carbon taxes also vary. Of the five countries he looked at, four of them had reduced the growth rate of emissions by .5 to 1.7. Only Sweden had a statically significant decrease of 10 percent, which he attributed to Sweden’s stricter tax exemptions. 

In a nutshell, yes, this solar policy works. However, for it to have a significant impact, it needs a high tax, the government needs to show transparency with the allocation of funds, and tax exemptions need limiting. While some would like to take the world by storm and transition to renewables yesterday, others feel this approach isn’t realistic. Let’s examine some other renewable energy promoting policy options.

Carbon Reduction Alternatives

Since implementing a carbon tax would cost end users a significant amount, many Americans have strong negative feelings about implementing such taxes. However, that doesn’t mean solar policies shouldn’t exist. Other policies such as cap and trade, hybrid cap-and-trade carbon tax, Clean Air Act regulations, energy-efficiency standards, cap and dividend; and carbon offsets all can play a role in the implementation of renewable technology.

Cap and Trade

Cap and trade limit how much carbon sectors can produce, then offers a fixed number of allowances that those who are in the industry can trade among themselves. Typically these allowances decrease over time and the limits on carbon increase.

Hybrid Cap-and-trade Carbon Tax

The combination of cap and trade and carbon tax means the government has a tax and restriction on production. How this looks depends on the area. Some areas employ both a tax and cap everywhere, while others choose where to apply each policy.

Clean Air Act Regulation

The Clean Air Act Regulation sets limits on air pollutants throughout the United States. It also gives the EPA the authority to limit emissions. 

Energy-Efficiency Standards

Energy Efficiency Standards set regulations that help determine the energy performance of certain products. It can also prohibit the sale of products that don’t meet these regulations.

Cap & Dividend

In the cap and dividend model, the government sets a limit on the amount of carbon a company can emit. The company then purchases permits for their carbon production, which then goes back to the consumer either in a tax credit or rebate.

Carbon Offsets

Carbon offsets reduce carbon emissions to cover emissions somewhere else. Utility renewable energy programs often function as a carbon offset.

Customers pay extra, so the utility will produce enough renewable energy to cover their energy needs. While the electricity powering the home may have come from coal, the company produces renewable energy somewhere else to offset it.  

While none of these policies will make the world a greener place on their own, the combination of these and others like them will make a difference.

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