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Negative Emissions and Carbon Pricing

One of the problems with carbon pricing is that it's difficult to use for negative emissions. Let's say that you set the price of carbon at the cost of removing the carbon from the atmosphere. That lets you get to net zero emissions, but it doesn't do anything about existing emissions. Now let's say that you increase the price on carbon to, let's say, 150% of the cost of CDR (Carbon Dioxide Removal). That lets you go net negative, but only by a certain amount. It's hard to calculate what percent of CDR your carbon price needs to be, since it depends on so many different factors. This is true even for global carbon pricing; it's even more true for local carbon pricing, where the total amount you need to remove depends heavily on what other jurisdictions end up doing. Carbon pricing is a revenue source that destroys itself, by discouraging the behavior it's incurred by. The percentage of CDR approach requires you to estimate how much total revenue the program will bring in over a certain period, how much it's going to need to spend on CDR, and then use those two data points to calculate the required percentage of CDR for the carbon price.

Another option might be to combine carbon pricing with public banking. In this system, a portion of the revenue collected by the carbon tax would be used for CDR, and another portion would be invested in clean energy projects in exchange for an equity stake. As those clean energy projects pay out dividends, those dividends could be used to pay for CDR. This would allow the program to continue to function even after gross carbon emissions fall dramatically, since the clean energy projects would still be generating revenue. This increased longevity would increase the amount of CDR the program could finance.

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