How high should carbon taxes go? How fast should they climb?
While carbon taxes will need to be very high to create the required price incentives, they will need to be phased in to give individuals and businesses the opportunity to adjust. There is no magic formula or right number, but a tax that grows at an annual rate equivalent to 5-10% of the “baseline” cost of fossil fuels probably offers a viable combination of meaningful incentive and opportunity for adaptation. The $37 per ton of carbon “starter tax” mentioned earlier, equating to around 10 cents a gallon of gasoline, fits the lower end of that range. At least as important as the tax level is the commitment to keep raising the tax, so that energy-critical decisions, from car-buying (Hummer or Prius?) to home-buying (exurb or transit-oriented community?) to factory locating (highway interchange or rail line?), are made with carbon-appropriate price signals.
