The 2030 Carbon Emissions Tax Sustainable Investment Group

The 2030 Carbon Emissions Tax

February 22, 2016

Reducing Carbon Emissions | Sustainable Investment Group (SIG)

The Clean Power Plan could cut carbon emissions by 30% by 2030

Reducing carbon emissions around the world is important policy and many nations have agreed to cut carbon emissions by 30 percent by the year 2030. The EPA rolled out the Clean Power Plan (CPP) last year to help electric power generators, the largest producers of greenhouse gas emissions (primarily carbon dioxide), by 30 percent by 2030. That’s approximately 730 million metric tons of CO2 emissions lower than 2005 actual levels.

Last week, the U.S. Supreme Court decided to stay implementation of CPP pending a judicial review. Assuming the passage of CPP, questions about the likelihood of a 2030 Carbon Emission Tax are sure to follow.

EPA’s Clean Power Plan vs. 2030 Carbon Emissions Tax

CPP wasn’t stayed on its merits, and EPA continues to uphold the plan’s importance. For states that choose to continue their work in cutting carbon emissions, EPA continues to stand by with support and tools to achieve proposed goals. It’s likely that some form of legislation will be passed to support the country’s commitment to reducing carbon usage:

• Each state in the U.S. has a different mix of power generator plants, so there are differences in how each state must figure out how the regulations, market mechanics, and subsidies apply to reaching goals established for them by the EPA.

• According to the libertarian Niskanen Center in Washington, D.C., the adoption of a revenues-neutral tax might be the “stick” needed to achieve 30 percent carbon emissions by 2030.

Most debaters agree that something must be done to achieve carbon emissions reductions by 2030. Many arguing against CPP believe that a 2030 Carbon Emissions Tax would simplify and cost less than the structure needed to enforce compliance with CPP regulations.

How Much Will a Carbon Emissions Tax Cost?

It’s reasonable to assume that CPP will pass in some form. If so, it’s also reasonable to assume that the CPP regulations will eventually be replaced by a 2030 Carbon Emissions Tax. If that’s the case, deciding how much a 2030 Carbon Emissions Tax will cost is likely to depend on each state’s “Marginal Abatement Cost” as established by the EPA.
• For instance, Georgia has no coal-generated power plants. The EPA’s Estimated Marginal Abatement Cost in 2030 (under CPP) is about $19/ton CO2.

• In comparison, West Virginia’s $101/ton, Utah’s $63/ton, or Colorado-Massachusetts-Connecticut’s $47/ton imply that a single factor national carbon emissions tax would be challenging to establish. How could government balance higher than average costs to the achievement of CO2 emissions reduction achievements?

Of course, electricity generated by fossil fuel plants will eventually become more expensive with the application of a carbon emissions tax:
• Niskanen reports that EPA estimates that approximately $27/ton in 2020 and $29 by 2030 tax rates for the electricity sector would be necessary.

• Importantly, Resources for the Future projects that a carbon emissions tax of $25/ton would elevate electric rates by about 1.2 cents/kWh.

• Current residential consumer electric rates average about 12.5 cents/kWh across the U.S. Massachusetts’ customers pay the highest rates (about 22 cents/kWh) and Washington state’s consumers pay the lowest rates (less than 7 cents/kWh).

2030 Carbon Emissions Tax Goals

Coal-users are likely to turn to cleaner natural gas as a first step but, ultimately, the carbon emissions tax works by increasing the cost of fossil fuels. A carbon emissions tax would make them more expensive to buy in comparison to renewable energy alternatives such as solar or wind energy.

The idea of a 2030 Carbon Emissions Tax is all about the bottom line. If world governments want to reduce the user of fossil fuels to improve air quality and reduce the impact of climate change, users are most likely to make adjustments that are economically beneficial.

Perhaps the long-range goal of the carbon emissions tax is to eliminate power generating plants that use fossil fuels. As more consumers use less expensive, sustainable power sources, there won’t be a need for higher cost fossil fuel electricity plants. The Citizens Climate Lobby estimates that an average 8 cents/kWh addition to electricity generation by 2030 will kill fossil fuel electricity generators by bankrupting them.

2030 Carbon Emissions Tax and De-Carbonizing the World

According to World Nuclear News, about USD 44 trillion is needed to achieve global decarbonization. Implementation of a U.S. carbon emissions tax is one of the ways that advocates say the U.S. can model the future for other countries.

Practically speaking, a U.S. carbon emissions tax in some form is likely. Creating your own carbon emissions reduction initiative today is one of the best ways to prepare for the future. You’ll reduce energy costs and do your part to reduce the carbon footprint.

Although recent federally-funded research shows that other variables in addition to CO2 emissions should be considered, it’s clear that converting the world to clean energy over the next 14 years is an important initiative.

Carbon Emissions Taxes and the Future

Technology improvements continue at a faster pace than ever before in the history of mankind. Power generation industry researchers believe that solar energy resources will become available to more users than ever before. This will increase the impact of a carbon emissions price model.

Most of us do respond to the impact of taxes on the prices we pay even if we don’t know our current kilowatt rate. Some form of a 2030 Carbon Emissions Tax is likely.

It’s up to each organization, business, property owner, and homeowner to make decisions about reducing the carbon footprint to live better and healthier now. It’s also up to everyone to protect the earth for future generations. A nationally-focused sustainability consultant can make a meaningful difference in your planning and execution process.

Contact Michael Cichetti at Sustainable Investment Group (SIG) to get started today at 404-343-3835.

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