The idea of a carbon tax has been floated for over a decade now as a way to more accurately represent the true environmental cost of energy. Many automakers have advocated switching from the current tax on each gallon of gasoline and diesel to a carbon-based tax on all energy sources as a way to help incentivize consumers to buy the cleaner, more efficient vehicles that automakers will be forced to build under new CAFE rules. The biggest advantage of a tax based on the carbon content of a fuel is that it is, at least theoretically, technology neutral. For example, diesel fuel would carry a higher carbon tax than gasoline because it contains 15 percent more carbon while the total cost of using diesel should be about 25 percent less because of its inherent efficiency advantage.

However, things are rarely that simple. For example, would a carbon tax be constant for a given fuel such as gasoline? Or would it be calculated based on the total lifecycle carbon output? Gasoline produced from crude pumped out of the Gulf of Mexico would have much lower life-cycle carbon than crude from Canada's tar sands. Similarly, would electricity be taxed based on whether it comes from coal, natural gas, hydro or solar? Clearly, to get the full benefit of a carbon tax, such granularity is needed to push consumers toward the truly cleaner energy sources. However, it may well be unmanageable because of the vast array of energy sources.

In general, a carbon tax would probably benefit most of the auto industry, although it could put a damper on some of the electric car enthusiasm as electric rates go up. The reality, though, it that it is not likely to be as representative as we'd like it to be.

[Source: Automotive News – sub. req'd | Image: 0x6612390]

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