Last update: 7/22/2008
In my last post I touted the benefits of a fully refunded emissions tax. Let's take a look at how it could work in California.
When it comes to a refunded tax, more money for industry doesn't mean less money for consumers. Case in point: Today's gasoline prices in California are averaging $4.58/gal, which equates1 to $536/MT-CO2e. That's how much California drivers are currently paying to emit CO2 -- and how much they could save from fuel economy improvements.
The same approach used by the Swedish program could be applied to motivate efficiency improvements in vehicles, consumer appliances, etc., by employing feebates, which can be implemented as a kind of refunded emission tax. The tax would be applied to projected lifecycle emissions (direct or upstream) and would be refunded in proportion to some measure of economic utility (e.g. refrigeration capacity, illumination output, etc.). The tax and refund together would incentivize lower emissions per unit of economic utility. Feebates could be used as an alternative to traditional performance standards, or could be used to effectively impose a price floor on a tradable standard.