A carbon tax will accelerate the deployment of decarbonization technologies
[In the spring], several large companies announced that they would commit close to one billion dollars to fund the development of carbon removal technologies. It is encouraging that the private sector is taking initiatives to invest in decarbonization technologies on such a large scale. However, Congress needs to pass an economy-wide carbon tax to help accelerate the deployment of carbon removal and other decarbonization technologies.
Frontier, the $925 million advance market commitment funded by Stripe, Alphabet, Shopify, Meta, McKinsey, and other companies, aims to spur the development of carbon removal technologies. Frontier will be a medium between suppliers and buyers and facilitate carbon removal purchases.
While this investment will no doubt speed up the development of carbon removal technologies, efficiently reducing emissions across the economy would require much more money and resources.
Enacting a carbon tax would help significantly accelerate the development of all kinds of decarbonization technologies. An economy-wide carbon tax would price the negative externalities per unit of emissions. With a clear and strong market signal of how much it would cost to emit carbon emissions, the business, and finance sectors would have incentives to make long-term investments in decarbonization technologies. As a result, more investments and resources will be mobilized to accelerate emissions reduction across the economy.
Additionally, a carbon tax is technology-neutral, and it does not favor any specific type of decarbonization technology. With a carbon tax in place, businesses have the flexibility to use mature or nascent technologies to reduce their emissions to lower their carbon tax liability.
[In April], the Business Roundtable, a trade association of top U.S. corporate executives, released a statement calling for a carbon price to accelerate clean energy transition. Business Roundtable recommends that the U.S. “establish a price on carbon that provides a clear long-term signal and incentivizes the development and deployment of technologies to lower emissions, and lead on international efforts to align potential cross-border carbon measures.”
Companies with resources and willingness to help decarbonize the economy have already invested in promising technologies. Policymakers can help accelerate the deployment of decarbonization technologies and clean energy transition by enacting a carbon tax.
This article is also published by Niskanen Centre. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the author
Shuting Pomerleau is a Research Manager of Climate Policy at the Niskanen Center. Her areas of research include carbon taxation, carbon border adjustments, and policies at the intersection of climate and trade. Prior to joining Niskanen, she has previously worked in public policy at the Cato Institute and the American Council on Renewable Energy.