Sure, phasing in a carbon tax is better than dropping it all at once. That doesn’t mean it works in every situation.
In raw economic terms, a carbon tax makes sense, and is even a ‘conservative’ solution: Instead of getting involved in picking winners and losers in the market, you just use a ‘Pigouvian Tax’ to correct for the externalities that distort the market, and let it adapt to the new reality. Then you use the revenue to fix the problems caused by the initial market externality. Standard classical economics.
However… Standard economics cannot overrule reality. If you want nuclear fusion you can tax the shit out of all the alternatives and you still won’t get niclear fusion if it’s impossible. You’ll just bankrupt a lot of people.
Biden is talking about the pain of high taxes being part of a ‘glorious transition’. I would ask, “Transition to WHAT?” Energy is famously inelastic to price changes, especially in the short term. So what behaviours are people supposed to do today if they don’t want to pay the tax? Buy an electric car? Good luck finding one. We are already resource constrained on batteries and rare earths and chips. It takes 5-10 years to open a new lithium mine. By the way, those $7500 imcentives in a world of restricted supply has just jacked up the price of the cars.
Last year 8.6% of passenger cars sold were electric. At that number, we have multi-year waiting lists. The other 91.4% of cars sold will be on the road for an average of another 12.5 years, Also, because we have taken so much electricity offline by shutting down coal and nuclear plants, the price is going up which is reducing the advantage of EVs. I just watched a video where a Ford Lightning competed with a Ford TurboDiesel. After the same driving distance, the Lightning cost $27 to recharge at a supercharger, while the TurboDiesel cost $32 to fill back up. Not that much difference, except the Lightning needed over an hour, and the other vehicle was done in 5 minutes.
In another test, a Lightning extended range pulling a 6000 lb trailer had its range reduced to 87 miles. That’s not a usable range. And the Lighning has a huge battery. For towing, EVs are not ready for prime time
In the meantime, we need 30% more electricity generation to handle electric cars and no feasible plan to provide it. Cities will need major infrastructure buildouts for home charging, and no one is planning for that either.
Everyone expects electric car sales to increase year over year from now on, but it’s possible that it will go the other way - as more electric cars are sold, it will soon be difficult to get charging infrastructure at home, there will be lines at electric charging stations, there will be rationing of charging when electrical demand is high and supply low, and the whole market will self-limit until the entire supporting ecosystem catches up.
Until then, you could double the carbon tax and all you’ll do is impoverish people further and distort the economy, because the people being taxed have no alternatives to what you are trying to push them away from. They’ll just take it out on you at the ballot box.
In energy generation, we are killing baseload power with no replacement. Wind and solar cannot do it without the ability to store energy for weeks, which we don’t know how to do and if we did would take many years to bring online. We are on a path to disaster. Our refusal to rapidly build out nuclear power is going to leave us with brownouts and blackouts, or a reversion to coal plants like other countries.
Germany has been heavily building out wind and solar for 20 years, while shutting down conventional and nuclear energy generation. The result is that they now import 55% of their energy in the form of natural gas from Russia, and they are considering re-opening coal plants. A total disaster. The Ukraine war wouldn’t have happened if Putin didn’t have massive leverage over iEurope due to natural gas, and without the revenue those sales are bringing to fund his war machine. Talk about your unintended consequences…
The most likely result of high carbon taxes at this time are that they will contribute to inflation, make business less competitive and drive more of it to China and India, and piss off the public to the point where they kick the Democrats to the curb and elect people who promise to make gas cheap again.