You either tax the fuel and pass the cost down to the consumers, or decide as a society to share the cost of the externalities and use general taxation for that.
You either tax the fuel and pass the cost down to the consumers, or decide as a society to share the cost of the externalities and use general taxation for that.
Why should all of society pay for these externalities? If some people manage to improve their energy supply and don't require dirty fuels, why should they be forced to subsidize those who won't?
Taxing the carbon at the source is simply correctly pricing it, and because it makes it impossible to shift the externalities away from the producer it fixes the accounting problem that falsely makes fossil fuels appear cheap.
Here, in the first scenario it directly punishes consumers for consuming more. In the second, it punishes everyone equally on everyone's consumption, which is unlikely to lead to behavior change. So yes, we should tax fossil fuels much more.
However, the first scenario will pass the increased cost of fuel down to the consumers affecting poorer people disproportionately. Example: some good that is produced with fossil fuels (including food) will become too expensive for low-income people, while richer (and more polluting) people will not feel the difference that much.
If you go for general taxation, you distribute the cost proportionally to income, making rich people pay more. Probably the ideal is a mix of both.
Ideally in the first scenario where we have well-functioning government, necessities like food and low-income housing would be well subsidized. Other things like random junk from Temu and large gas-guzzling trucks will be less accessible to poorer people by design.
So… it’s like you completely understand the issue :)
And obviously, you tax the fuel at the source, right when it comes out of the ground. Higher prices get passed down, changing behavior because the products externalities are priced correctly from the start.
To be clear, the source would still be the consumer. Hydrocarbons can be used for non-CO2 emitting purposes such as chemical feedstock for pharmaceuticals, solvents, etc. We should only be levying a tax upon uses that emit CO2 into the atmosphere, i.e. burning them in your ICE vehicle. It’s not the fracking company that’s emitting the CO2 (unless they’re gas flaring or similarly emitting carbon during extraction but this is a rounding error on total emissions).
You can. Everything- including basic things like food, transportation, construction, healthcare- will become more expensive, of course. My objection was to ask fossil fuel companies to pay after you already bought and burned your fuel cheap.