A Do It Yourself Carbon Tax in 5 Simple Steps

Six weeks ago, I decided to impose a carbon tax on me.  Call it a DIY carbon tax.

I received lots of enthusiastic comments and great ideas for improvement. Many people joined me and together we are reducing our emissions of carbon dioxide, improving our energy efficiency, saving money, investing in cleaner energy and helping to end energy poverty. My thanks for your efforts.

Others were quick to criticize the initiative, suggesting that individuals make little difference, and that it is only through regulation and legislation at a massive scale that CO2 emissions will be reduced. Perhaps. But it is all too easy make demands of others. If you want to see change, you often need to start with yourself.

So, I started with me. You can make the choice to do the same. Then imagine if everyone you know who is concerned about energy, climate and energy poverty initiated their own personal carbon tax.  Imagine the energy savings, the cuts in emissions, the business and research opportunities, the improved lives of people living in energy poverty, and the opportunities for creating wealth and investing in our future.

What is needed now is for a lot more people to actually move beyond imagination - to take up the challenge - and to challenge their friends, family, colleagues and neighbors to do the same.

Here is how my Do It Yourself Carbon Tax works:

• Cut CO2 emissions by 10 percent next year and 50% over the next decade through energy efficiency, conservation, lifestyle choices, and implementation of new technologies.
• Tax yourself with a $40/ ton self-imposed price on carbon (or whatever price you feel is most appropriate).
• Save money through energy efficiency measures to offset or complement the tax.
• Invest your tax and savings in companies, institutions and organizations researching, developing, implementing and deploying clean energy solutions.
• Contribute to organizations and institutions helping to reduce energy poverty around the world.

How you can do it:

Step 1: Determine your current CO2 output
You can calculate your personal  CO2 footprint using any number of widely available, free online calculators. See the full proposal for useful links. With the help of these calculators (there are many others) in less than 30 minutes you can determine your personal CO2 output in tons per year.

Step 2: Establish your carbon reduction target
My goal is a 10 percent reduction in my own CO2 emissions in year one and to cut my emissions in half over the next decade. I plan to review my target range annually. There are many ways you can achieve a reduction in your CO2 emissions. For some useful links to  lists of CO2 reduction measures each of us can take, again refer to the original #carbontaxonme proposal.

Step 3:  Apply a price for carbon to your CO2 output and determine your annual carbon tax
Just this past week, in a well-reasoned article in the Financial Times, former U.S. Treasury Secretary Lawrence Summers called for a carbon tax and suggested a price of $25/ton.   I will take a more aggressive approach and impose a personal carbon price of $40/ton CO2 per year on myself. Note that this is well above the price of carbon as traded anywhere in the world.  I will review my personal carbon price annually.

In application then, I simply multiply my carbon price of $40/ton times my calculated CO2 emissions
to arrive at the annual carbon tax.  At the average per capita emissions of CO2 in the US of 17 tons
per annum, the carbon tax would be $680.  With strong energy conservation and efficiency measures you can save money to offset the tax and in many cases will actually come out ahead.  Still, if my proposed $40/ ton carbon tax is too high for your budget, simply consider a lower carbon price, such as Summers' $25 or Microsoft's $6-7. Corporations have disclosed a wide range of prices which you may wish to use as benchmarks:

Step 4:  Save and Invest the tax proceeds
Which brings us to what you can do with your tax proceeds and cost savings? Invest!  As with any investment you can choose between many options, but I will narrow it down to three.

Investment Option 1: Invest in companies that develop, produce and deploy products and services available now to reduce our carbon footprint - solar solutions, efficient wind turbines, high MPGe vehicles, storage, grid and off-grid solutions,  local produce, Socially Responsible Investment funds and energy financing options to name but a few.

Investment Option 2: Invest and support Research and Development with institutions and organizations doing high quality basic and applied research in science and engineering directly related to energy, as well as those addressing broader policy issues.

Investment Option 3: Invest directly in the products and services that reduce your carbon footprint.
Buy solar panels for your home, participate in distributed energy systems, purchase a hybrid or an electric vehicle, support local foods, install efficient lighting. There are many options which will help you save energy and money.

Step 5: Support Organizations Helping to End Energy Poverty:

Use a portion of your tax and savings to invest in organizations that help alleviate energy poverty 
around the world. The world needs energy now, especially in poverty, famine and disease stricken places like sub-Saharan Africa.  Every contribution helps.

Each of us can make a difference. How much of a difference is up to you. Collectively the impact can be massive. Join me now by posting your personal pledge at #carbontaxonme and copy me @lawrence_energy and we'll track our momentum together. Let's watch our contributions add up.