Elon Musk Makes Libertarian Argument for a Carbon Tax

Tesla CEO Elon Musk has been tweeting a lot lately, and one of his tweets links to a newspaper article in which he advocates a libertarian argument for a carbon tax.

Musk’s tweeting of several stories could be an attempt to shape the conversation during a time of controversy for the company, including over the brand’s Autopilot, Gigafactory, and Solar City merger. He’s been tweeting links to stories that give the automaker positive coverage. No shock there, as all companies likely do that, but the timing indicates Musk is in tune with what’s being said about Tesla, and he wants to make his message heard.

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One of those messages is on a carbon tax. During a media tour of the Gigafactory outside of Reno, Nevada, a local reporter asked Musk about state subsidies and whether certain businesses, including automotive, could be sustainable without them.

“With respect to some of the other elements for solar panels and EVs, the big issue we have is that in reality if you accept the scientific consensus every oil burning activity is subsidized, dramatically,” Musk said. “If you believe there is a value to the CO2 capacity of the atmosphere and oceans and that CO2 capacity is not being paid for by the price at the gas pump or the coal that is being burned for electricity generation or whatever its use may be then every single fossil fuel burning activity is massively subsidized.”

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Musk’s argument is that subsidies hinge on whether you believe in global warming.

“This has become sort of an ideological issue because there are people who think that global warming is not true,” Musk continued. “So if you believe it is not true then it is a subsidy for sustainable energy. If you believe it is true then all we are doing is trying to match the inherent subsidy for fossil fuels, match that on the sustainable energy side. That is all it is doing. It is not one is getting a subsidy and the other one isn’t. Fossil fuels are already getting a massive subsidy if you believe in global warming. If you don’t then it seems really unfair. If you do then it is like oh we are just trying to correct it.”

“The real right way to correct it would be to establish a carbon tax,” Musk added. “If you ask any economist they will tell you that is the obvious thing to do, put the correct price on carbon because we currently have an error in the economy which misprices carbon at zero or something closer to zero. It is a fundamental economic error. For people that have a sort of libertarian bent they get a little confused because they need to appreciate the high level principle of why they are opposed to government intervention.”

Musk’s argument is more from an economic point of view than environmental.

“They are actually opposed to government intervention because it causes false pricing. If the government says we are going to massively incent the production of corn, so that effectively corn gets mispriced and we make too much corn, that actually then does not benefit the country if you make too much of something because of a government driven pricing error.”

“That is bad for people. That is sort of what people with a libertarian bent are opposed to. However if you have something where you have an unpriced externality so that you have the case of the CO2 capacity of the oceans and atmosphere priced very close to zero then any government action to increase the price above zero reduces the error in the economy. I’m getting sort of esoteric in economics here, so what they should actually be opposed to is anything that increases the error in the economy, a pricing information error. So pricing carbon, if you believe in global warming, does not increase the price of the error it decreases the price of the error.”

Reno Gazette-Journal