As we get closer to Paris, powerful voices are lining up to support a carbon tax. When you look closer, you see that the voices have different motives and divergent goals. In June 2015, six of the world’s largest oil companies sent a letter to the UNFCCC asking for a global carbon tax to be part of the new climate agreement. This month, in an Atlantic Monthly article, Bill Gates, argues we need a carbon tax to drive a low-carbon future.
Both parties call for a carbon tax but their preferred outcomes couldn’t be more different. They both see a world that needs more energy not less. But the source of that energy divides them. And their use of the carbon tax and the carbon tax revenues reveals the split.
The oil companies acknowledge that we need faster action to cut emissions. They call on the UNFCCC to “introduce carbon pricing systems where they do not yet exist at the national or regional levels” and to “create an international framework that could eventually connect national systems.” The companies say that they want a levelized international playing field where the same rules apply to all participants. What they don’t want is an energy revolution. What they do want is to retain the existing hierarchy. For them, a global carbon tax equals business certainty and economic stability. Everyone who can pay the price can continue to do business and their business model depends on exploiting the fossil fuel reserves they control. That is why their proposal avoids discussing how to spend the revenues.
Bill Gates doesn’t see the same profitable future for fossil fuel companies. He wants an energy miracle built on new energy technologies and he wants a carbon tax to fund that miracle. He argues that current proposed market solutions will struggle to achieve a 30% emissions reduction by 2030 and they will fail to produce an 80% emissions reduction by 2050.
Gates identifies a lack of research spending as the culprit. The U.S. government funds health research at approximately $30 billion per year while federal energy research only gets $6 billion dollars per year. Gates wants carbon tax revenues to fund massive investments in energy research and development (R&D).
Taxes require collection and spending. While both proposals discuss collecting the carbon tax, only Gates talks about where to spend the money. Feeding a starving energy R&D sector could kick start an energy miracle. A carbon tax that maintains the status quo will lock us into a fossil fueled future. As Paris gets closer, there will be more calls for carbon taxes. Will tax proponents want more of the same or will they want a new energy future? The answer lays in the how they spend the revenues.