4

For context:

Sweden is said to have the highest carbon price in the world at €110/ton (source). This price only applies to emissions not covered by the EU ETS (about half) which currently trades at an all-time high of €38/ton (source). 

The implicit CO2 tax on petrol in the EU is €140-300 (source). Yet at the same time the share of SUVs in the EU is actually increasing (source).

Are there studies that evaluate which CO2 price would actually lead to significant changes in consumption patterns?

1
  • Interesting to note that the cost vs popularity of flying is much studied but relatively price insensitive, at least for the level of variation we normally see. The flygskam movement likewise did little, it took the pandemic to get people to decide that flying less is worth while. Which suggests that "what price" is not measured in money, it's measured in lives. – Móż Feb 15 at 7:37
1

A while ago I worked out that a $100/T carbon tax translates to about 6 c /liter (about 25c/gallon) This probably won't push people to drive much less or to buy smaller cars. However EV's are increasingly a better deal in terms of TCO, mostly because electricity is sold at low prices due to both subsidies and external costs.

A tonne of coal is about 2460 kWh of electricity So a $100/T carbon tax would increase electricity costs by about 4 cents/kWh, or about 40%

40% is enough to get people's attention, particularly businesses with high energy products.

The ideal solution is a tax that increases reasonably rapidly and predictably. E.g. If $100/T is enough to make small amounts of pain, then increasing this by 10% per year will get lots of people thinking on how to use less energy. It also establishes a predictable floor price for renewable power, encouraging investment.

2
  • Looks like some words got cut off after "mostly because electricity is ..." – LShaver Feb 15 at 14:53
  • @LShaver saves energy... – MolbOrg Feb 15 at 23:27
0

Can't say if such studies exist, doubt that, so as doubt the usefulness of that for certain reasons from an economic point of view.

Fundamentally one of the reasons is that it like tax or inflation and there are simpler behavior patterns to be set in motion by that - the same as if there is inflation - people demand a pay rise and all that, raising prices of service to offset expenses and all that.

and not sure if there are possible some generalizations as sure there are commonalities but so as specific differences, country local environment-specific. it may affect differently not only different cities but different districts in one city.

Another reason is, look there always have been cheap and small cars as an example, but yeah their share stays small as well - those who look for alternatives they do that for a set of different reasons and gas price, not necessarily even top 10 reasons on their list.

So there would be hard to establish some magic numbers for a variety of reasons Dependency u looking for is hard to establish in a much simpler case of grocery prices.

So more important is where existing tax money is spent in? Are they invested in the development of energy-saving solutions etc? Do that money work in finding implementing solutions? is it enough money for the changes? etc.

Let's look at an ideal car - it is 100 percent efficient, very small but combustion engine so it burns gas anyway. And if one has to use the car for personal transportation needs, one has to pay the gas price no matter how much it is. And it not possible to improve it further no matter the efforts. if u like to investigate the mass behavior patterns it may be not that bad to start with the USA 1973 1979 oil crisis.

And then the question is not does the tax changes behavior of individuals, but attractive solutions available to them, do they have to do certain things or don't. people are lazy energy-saving creatures and if one offers better convenience people go for it, one of the reasons small cars share isn't huge.

Modern electric cars offer certain conveniences, in certain cases, but not always.

So it needs to look not for a golden number, but it has to be low enough to not trigger inflation behavior, and the created monetary stream has to be directed where it brings changes, in an efficient way.

work with energy-demanding industries to find solutions, energy-producing devices etc etc. So the effectiveness of carbon tax is limited from the start, it just another straw to a camelback, and it is important what else one does. And it would be a mistake to think that all the solutions lay in where energy is consumed or produced. Changes in city planning, how the work is done, delivery of goods and services - that may have a greater effect on behavior changes. And remember nuclear energy is carbon-free.

0

Are there studies that evaluate which CO2 price would actually lead to significant changes in consumption patterns?

Such a study would be of very little interest.

The change will not happen in consumption patterns but in production patterns.

For example, you pay today perhaps 30 EUR / MWh of natural gas with transportation but without CO2 prices.

NEL has a 1.5 USD / kg target for green hydrogen. This is 45 USD / MWh or 38 EUR / MWh.

A megawatt-hour of natural gas produces 0.2 tonnes of CO2. So already the European emission trading price 40 EUR / tonne today is imposing an additional 8 EUR / MWh tax, so 30 EUR / MWh turns into 38 EUR / MWh.

So, that's why interest today in green hydrogen is increasing and stock prices of hydrogen companies are sky-high and all natural gas turbine / engine manufacturers are racing to create a turbine / engine that can burn 100% hydrogen.

One problem is that the infrastructure for delivering natural gas is already installed. It is a sunk cost. So a carbon price of 190 EUR / tonne would make all such infrastructure worthless as a natural gas producers and transporters wouldn't get any revenue from their product because the entire 38 EUR / MWh price would go to taxes.

So, we can safely say that a carbon price of 190 EUR / tonne will end the use of the cleanest fossil fuel of them all, natural gas.

As we know, in many European countries all of the taxes imposed on gasoline vehicles (purchasing, owning and driving) amount to about 300 EUR / tonne of CO2. So even this level of pricing does not affect consumption.

But a price lower than 300 EUR / tonne, only 190 EUR / tonne, would affect production.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.