A carbon price and a tax on a fuel both discourage the use of fossil fuels, but there are some differences in how the fees are applied. The Carbon Price slider places a fee on fuels depending on the amount of carbon dioxide they release when burned, while the Coal, Oil, Natural Gas, and Bioenergy sliders adjust the cost of producing the fuels themselves. The “taxed” label here is broader than a direct government tax, and reflects any action that would increase the cost of these resources.
The maximum ranges of the En-ROADS sliders do not represent equivalent amounts of effort. For example, the maximum range of the Carbon Price slider is $250/ton, which is equivalent to $660/tce tax on coal. The maximum range of the Coal tax slider is $100/tce. Moving the Carbon Price slider to its maximum appears more powerful than taxing fuels, but this is only because the slider ranges are different. To learn more about our slider ranges, read this FAQ: Why are the slider ranges (min and max) what they are? How did you decide the range of the sliders?
Here's a summary of the differences:
A carbon tax could be achieved by applying a comparable tax on each fuel. A carbon tax of $40/ton is roughly equivalent to:
$106/tce tax on coal
$15.2/boe tax on oil
$2.20/MCF tax on natural gas
$13.2/boe tax on bioenergy
To go deeper, explore the En-ROADS Technical Reference.
What happens in a scenario with both a carbon price and a tax on fuels?
When both a fossil fuel tax and carbon price are implemented, there is some redundancy. The cost of producing coal, for example, can be increased with either a tax or a carbon price. When this occurs, you'll notice that the primary energy demand of coal decreases. When you add another way of pricing it, producers have already taken steps to reduce their supply of that now more expensive fuel, and the impact of an additional policy that increases costs will be less. En-ROADS takes this into account, and there is no “double counting” in the model. For more information, read this FAQ: Does the order of actions in En-ROADS affect the outcome of the scenario?
Does the Carbon Price slider in En-ROADS apply to bioenergy?
A carbon price makes energy sources more expensive depending on how much CO2 they release. Although bioenergy releases CO2, by default in En-ROADS the Carbon Price slider does not apply a carbon price to bioenergy.
Most carbon prices currently enacted around the world do not tax bioenergy—for example, the EU’s emissions trading system considers bioenergy power plant emissions to be zero. Therefore, raising the carbon price in En-ROADS incentivizes bioenergy because its fossil fuel competitors (coal, oil, and natural gas) get more expensive.
To change this setting in En-ROADS and apply a carbon price to bioenergy emissions, turn on the "Carbon price applies to bioenergy emissions" switch in the Carbon Price slider's advanced settings:
How does a carbon price vs. a fuel tax affect carbon capture and storage (CCS)?
By default in En-ROADS, a carbon price incentivizes carbon capture and storage (CCS), while a fossil fuel tax does not. This means that if an approach like CCS for carbon dioxide is used on, for example, a natural gas power plant, then the natural gas would not be subject to a full carbon price because emissions are reduced by CCS. However, the price of the fuel could still be increased by a natural gas tax. To change this setting in En-ROADS and apply a carbon price to CCS emissions, turn off the "Carbon price encourages carbon capture and storage (CCS)" switch in the Carbon Price slider's advanced settings.