I am not opposed to this, but I am curious how a government would arrive at a "price" of carbon emissions. How is the tax rate decided upon? Is it a political game of just enough to make renewable energy more attractive? Or is it as high as we can make it? It just seems like it would have no basis in reality.
Start low, increase steadily to meet emissions targets.
Canada recently introduced a carbon tax at the federal level (for provinces that did not price carbon themselves), and returns 90% back to those province's taxpayers via tax credits. This makes it a progressive tax; if you lived an emissions-free lifestyle you'd just get free money, if you're around average the rebate would offset the carbon tax, if you're a high consumer you pay more.
>I am not opposed to this, but I am curious how a government would arrive at a "price" of carbon emissions
The conventional approach right now is that you have a limited number of CO2 certificates that give a company the right to pollute. The number of CO2 certificates is reduced every year to meet a defined goal like avoid warming beyond 1.5°C. Companies are handed a certain amount of certificates depending on their size (prone to corruption). If they don't have enough certificates they must buy additional certificates. If they have too many they can sell them for a profit. Supply and demand determine the price.
The problem is that too many certificates are being handed out until now the price in the EU market was in the single digits and shot up to 25€ per ton. Because people are allergic to revenue neutral carbon taxes that are offset by redistributing the tax income the latest approach is to simply set a minimum price for CO2 certificates. People think they understand taxes but they certainly don't understand CO2 certificates. The end result is that there will be very limited redistribution.
> Companies are handed a certain amount of certificates depending on their size (prone to corruption).
Seems like it would make sense to replace the "hand them out based on size" step (I've heard "based on historical emissions" before as well) with "auction them off to the highest bidder".
This isn't revenue neutral, but you could make it so by then simply cutting some tax (personal income tax, most likely) until it is, if that's the goal.
If we want to hit zero emissions, the price should be set such that it exactly covers the cost of removing the CO2 from the atmosphere.
Of course, if it's cheaper to just not emit that CO2 in the first place (capture it or use a different process for whatever they're doing), companies can do that instead.
