Why We Need A Carbon Fee

Carbon Dioxide Removal

Carbon dioxide is removed from the atmosphere slowly by natural processes, mainly absorption in earth and plants, but this process takes hundreds of years.It is technically feasible to remove carbon dioxide from the atmosphere mechanically. However, it’s not an economical or practical way to reduce CO 2 in the atmosphere at present.

To solve this problem, the Elon Musk Foundation has established a $100 million X Prize for anyone who can create and demonstrate a solution that can pull CO 2 directly from the atmosphere or oceans, that can be scaled to gigaton levels, and can permanently lock away the captured CO 2 in a benign way. This is the largest incentive prize in history.
Whatever the cost of removal, wouldn’t it be cheaper to avoid putting the CO 2 into the atmosphere in the first place?

What could it cost?
To get investors to pay for carbon removal projects, there would have to be a market for the CO 2 removed from the atmosphere, or a carbon fee higher than the cost of removing CO 2.

To reduce CO 2 concentration by 1.0 ppm from the current concentration of about 412 ppm we’d have to remove 8.6 billion tons of CO 2 . A cost of $100 to $200/ton to remove CO 2 is assumed based upon estimates in various reports and articles. It would take an estimated $900 billion to $1.6 trillion to remove only 1.0 ppm of CO 2 from the atmosphere. It would be necessary to do this one hundred and thirty times to return the atmosphere to pre-Industrial Revolution conditions, 280 ppm.

Removing CO 2 from the atmosphere would also be a very energy-intensive process. An authoritative estimate is that it would take about 366kWhr of electricity to remove one ton of CO 2 . It could take an estimated 10 to 12 percent of the world’s electricity production to power the process.

An additional cost for underground storage of the CO 2 removed from the atmosphere should be included in any analysis.

Would we need a carbon fee?
Ideally, a carbon fee should at least equal the cost of removing CO 2 from the atmosphere. In our example, this would be $100 to $200/ton. We refer to a carbon fee, not a tax. This fee would be compensation for public health costs and environmental damage resulting from discharging greenhouse gases and other pollutants into the atmosphere. These emissions shouldn’t be free. To the extent that fossil fuel emissions are free, this is a huge subsidy for fossil fuel use relative to renewables. This subsidy is estimated to be $5.0 trillion annually.

Applying a carbon fee all at once would be too big a burden on the economy and would cause a recession. Any fee should start at a lower number, and increase annually until the fee at least equals the cost of removal.

A carbon fee could be a source of government revenue. A $40/ton fee applied to U.S. emissions would raise about $200 billion/year annually to pay for government programs to reduce global warming. This revenue would increase annually as the carbon fee is increased until the reduction in fossil fuel use offsets any increase in the carbon fee.


Fuel Additional cost
Gasoline $0.33/gallon
Natural gas $1.92/kcu.ft.
Home heating oil $0.37/gallon
Coal (Bituminous) $81/ton
Jet fuel $0.35/gallon

Craig Smith and Bill Fletcher

Reaching Net Zero: What it Takes to Solve the Global Climate Crisis