It’s Time for a Combustion Tax
I’ve said it. This may be one of the most straight-forward, efficient, clean, direct, and effective ways to spur the energy transition and start the painful process of reducing high concentrations of greenhouse gases in the air.
This is a difficult concept to swallow. It affects consumers directly. It makes no positive judgement about what the combustion is for. The burden is borne by almost every societal entity. On the other hand, it directly penalizes a bad behavior, and funds pathways to replace them with good behaviors.
Let’s start with the basics. Humans in my part of the world mostly combust wood, heating oil, natural gas, and gasoline directly, on their own, in their own homes and vehicles. And through their electric utility, they also combust coal. Further up supply chains, companies combust various kinds of fossil fuel. Governments and other institutions combust fuels to run their operations. All of this combustion sends co2 and other greenhouse gases into the air. All this combustion would be taxed under a Combustion Tax scheme.
The baseline tax would be calculated from a carbon price. Various countries have put a price on emitting co2. I will use $150 as the “price”, and I will use a gallon of gasoline as a combustion example. There are 2,250 pounds in a metric tonne, and burning a gallon of gas emits about 19.6 pounds of co2. That means we can spread the $150 carbon cost across 2,250 pounds / 19.6 pounds per gallon, or 114 gallons. The 100%, one for one, all in cost is therefore $150 / 114 gallons, or $1.31 per gallon. In this case, consumers would pay an extra $1.31 per gallon in Combustion Tax.
Pretty steep, but let’s think about how to get there from here. You don’t have to go for a 100%, “like for like”, tax right now, and maybe not even ever. How about phasing it in, 5% per year, over 20 years? In the first year, the tax per gallon would be about 6.5 cents, and 13 cents in year two. As far as consumers are concerned, this is the proverbial drop in the bucket.
A tax like this takes an ever-larger bite over time, but the bite is offset by ever-increasing combustion efficiency. This would occur all the way up and down the supply chain. The Combustion Tax would be a predictable thumb on the scale, convincing all of society to change their ways. Even industrial processes, hamstrung by sunk costs, have steady and predictable motivation to change and become more combustion-efficient. Consumers could gradually buy hybrid or fully electric vehicles, heat pumps, and solar panels.
Countries could apply import penalties or rewards, depending on the regime applied in the source country. Blue Jeans made in the United States might need to accept a lower price if they don’t pay a combustion tax domestically. Alternatively, they could follow and publish a company-specific regime like internal carbon pricing, to convince importers not to apply any penalty.
Governmental policy could be applied to distinguish between emissions for different purposes. For example, biochar production and Direct Air Capture are virtuous activities, but often require the emission of lots of dirty greenhouse gases. Because these lead to carbon dioxide removals, discounts against the Combustion Tax might be appropriate. Less fortunate citizens or certain industry categories might also receive favorable consideration.
And how about the use of taxes raised? Well obviously, at least 99.9999% of it should be spent on durable carbon dioxide removal credits from Woodcache Corp :-). Another portion should be spent supporting and subsidizing the development of renewable and non-combustive energy. Finally, research and development into lower carbon industrial processes could be a component.
No doubt the Combustion Tax is a stick, not a carrot. But if applied correctly it is gradual, and even gentle. It can be managed from a policy point of view. It calls for support from all societal participants. It provides time for industries, institutions, and consumers to steadily change their ways.