25 September 2009

Carbon Tax Update

Well, it's beginning to look like France will impose its own carbon tax €17 ($24.90) per ton of CO2.

French President Nicolas Sarkozy wants to move France toward greater reductions in carbon emissions, but it is also a reflection of just how big a failure that Europe's cap and trade regime has been, with the creation of false offsets overseas, construction of hydroelectric plants without transmission lines in China, and paying farmers not to grow food.

In addition to that, there is the detail that the markets simply do not work, creating a "pollution fire sale,"* which makes this system a joke.

In any case, I ran the numbers, and got about $0.2212/gallon, which in the scheme of things is not a huge chunk of change, particularly in France, where the price of a gallon of gas is about $6.00 including tax, but it is likely to make coal powered electricity much less competitive, particularly if the tax goes up over time.

France is emulating Finland and Sweden, who implemented carbon taxes over a decade ago, and got reductions in emissions, as opposed to the EU cap and trade, which hasn't ever worked.

On a related note, both Caterpillar and Federal Express are lobbying for a carbon tax instead of a cap and trade too.

They mention a number of reasons, not the least of which is the giveaways to big coal, but the big reason is buried a few paragraphs down here:
A predictable, graduated tax would have an impact on the role of the military overseas, improve the environment and be good for the economy, [FedEx CEO] Smith argued.
(emphasis mine)

Simply put, they don't want to live in a world where the cost of carbon credits will fluctuate day to day because of the machinations of that great vampire squid wrapped around the face of humanity, Goldman Sachs.

FedEx and Caterpillar, and pretty much everyone but the coal burning utilities can live with a carbon tax, it effects them all equally.

If you make carbon permits a trade able market commodity, and suddenly you have where the difference between survival and bankruptcy are choices in an opaque and volatile market.

You end up diverting enormous resources from upgrading equipment and doing research on more efficient ways to do things, and drive it into the blood funnel of the vampire squid.

*Original author's pun, not mine.
I assume that the tax is actually per tonne (metric ton), so that is 1000 kg of CO2, which is 273 kg of carbon. This means that the actual tax for a kg of carbon is about €0.0623 per kilo of carbon.

A good approximation of the formula for gasoline is C8H18 (It's actually a witches brew of different hydrocarbons), and the weight of a liter of gasoline 0.76, so the weight of carbon in a liter is about 0.64 kg.

This gives a tax of about €0.03989/liter, or about $0.2212/gallon

Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

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