Could a revenue-neutral carbon tax drive solar adoption?

[DanKegel]

Policymakers have lots of tools to encourage renewable energy and energy efficiency - tax policy, advertising, subsidies, and mandates - but one that hasn't been tried much in the US is a revenue neutral carbon tax.
As Pleppik wrote earlier,

There seems to be a fair consensus among economists that the "best" way to reduce CO2 emissions is to attach a price to CO2 (at least insofar as there's consensus among economists for anything).

Adding a fee on co2-fired electricity and natural gas would make solar and other renewable energy more competitive.
But the numbers might be substantial, so to avoid damaging the economy, the revenue from the fee should be returned directly to taxpayers.
British Columbia has been doing this for seven years now; see

http://en.wikipedia.org/wiki/British_Columbia_carbon_tax

http://www.fin.gov.bc.ca/tbs/tp/climate/carbon_tax.htm

The exact taxes reduced by this refund are listed here:

http://bcbudget.gov.bc.ca/2014/bfp/2014_budget_and_fiscal_plan.pdf#page=74

The tax was initially unpopular, but polls seem to indicate people like it now:

http://www.environicsinstitute.org/uploads/news/environics%20institute%20-%20focus%20canada%202012%20-%20public%20opinion%20on%20climate%20change%20-%20december%2014-2012.pdf

Its unlikely story - and the failure of a similar federal tax - is described here:

http://www.standupeconomist.com/pdf/carbon/2012.Harrison.TaleofTwoTaxes.pdf

and http://www.carbontax.org/services/wh...rbon-is-taxed/

What do you think -- would a revenue-neutral carbon tax make solar more competitive with fossil fuel generated elecricity in your state?
And should it replace existing incentives (like net metering)?

[sensij]

Isn't that what the CA climate credit does, at least in part? It seems like you are starting from a position that incentivizing RE is good policy, with which you will probably not find universal agreement.

[DanKegel]

Isn't that what the CA climate credit does, at least in part?

I don't think California's climate credit makes solar more competitive with coal-fired electricity because it doesn't increase the price of coal-fired electricity; that's set by tariff, isn't it?

[sensij]

Don't the emission permits that fund the climate credit make operations more expensive for any emitter of CO2, including a coal generator?

Where does the money for the Climate Credit come from?

Funds for the Climate Credit come from a state program to fight climate change by limiting the amount of greenhouse gases that large polluters can release into the atmosphere. Each year the state auctions a limited number of emission permits so that California can meet its goal of reducing its overall emissions down to 1990 levels by the year 2020. Some of the aution money is used by the state to fight climate change, and some is returned to many Californians as a Climate Credit. This program is one of many developed as a result of the Global Warming Solutions Act of 2006, which put California at the forefront of efforts to battle climate change. To learn more about California’s effort to fight climate change: www.energyupgradeca.org/climatechange.

[russ]

Silly stuff to make air headed greens happy and nothing more - learn the percentage of power generated by RE (excluding hydro) and you will see it amounts to nothing.

[DanKegel]

Don't the emission permits that fund the climate credit make operations more expensive for any emitter of CO2, including a coal generator?

Eventually, yes, but it may take a year or two to trickle through the rate-setting machinery, and each local power company would have to grind through that process. Different areas might end up being affected with different delays. Also, the rules for the cap and trade system are complex and might be expensive to administer and enforce.

A revenue-neutral tax, on the other hand, would be relatively easy and quick to levy and enforce, since taxes are already collected; all we have to do is adjust fuel/electricity taxes upwards, and (say) sales tax downwards.

[J.P.M.]

I don't think California's climate credit makes solar more competitive with coal-fired electricity because it doesn't increase the price of coal-fired electricity; that's set by tariff, isn't it?

Not specifically. What makes you think that ? In general, the selling price of elec. is set by the CPUC.

[Sunking]

Policymakers have lots of tools to encourage renewable energy and energy efficiency - tax policy, advertising, subsidies, and mandates - but one that hasn't been tried much in the US is a revenue neutral carbon tax.

You are falling for the scam you mindless fool. Global Warming was invented for one purpose. To get more money out of your pocket.

[DanKegel]

Not specifically. What makes you think that In general, the selling price of elec. is set by the CPUC.

I checked just now - evidently the CPUC regulates rates for some but not all power companies (see http://www.cpuc.ca.gov/PUC/energy/Electric+Rates/). I imagine utilities propose rates, do outreach sometimes so people aren't surprised by rate chamges, and finally some authority approves them, all of which takes time.

I agree that, regardless of CPUC rate regulation, cap and trade should eventually lead to higher electric rates, which would make solar more competitive, but it's pretty opaque compared to the revenue-neutral tax approach. That may have been one of its selling points.

http://www.brookings.edu/blogs/plane...g-carbon-frank compares the two approaches and suggests cap-and-trade may be an easier sell. Still, there might be states where it's a good fit.

[russ]

Cap & Trade is wonderful - when I worked in India we milked that cow - easy money from suckers in the EU and the US.

One large scam and nothing more.