Suddenly the Carbon Tax has entered the fiscal cliff debate on both sides of the Atlantic, as a very credible candidate to generate additional revenue for governments to mitigate the debt burden.
A Congressional Research Service Report states that a carbon tax of $20 per ton would generate $88 billion in 2012, and a projected $144 billion in 2020.
It is very tempting to budget in this new source of revenue to mitigate public debt, but it remains far from clear how this would do anything for global warming.
It is important that if governments decide to make energy producers pay for their emissions, every single cent of this should be allocated to a green budget to fund decarbonisation and mitigation measures that are sufficiently sound projects which provide measurable GHG emissions reductions.
If a carbon tax revenue of $20 per ton is allocated to subsidize renewables projects, including nuclear, it will facilitate a fast-tracking of decarbonising the energy industry. This will be the clearest incentive to phase out the old polluting forms of energy generation.