A carbon tax would seem to discourage construction of new coal-fired boilers. It would seem logical that initiatives to reduce global warming would have a negative effect on the industry which depends for more than half its revenues on coal-fired power plant owners. Furthermore, other major purchasers such as chemical plants and pulp mills are dependent on the low cost electricity delivered by coal generators. They are also major emitters of greenhouse gases.
However, a careful analysis reveals that a carbon tax would have a mildly positive effect rather than a negative effect on the air pollution industry. Here are the reasons:
The least expensive way to reduce CO2 emissions is to replace existing coal-fired plants with new more efficient plants. Europe is leading the way in this replacement program. Germany alone has a program to replace one third of its existing capacity prior to 2012. This program alone will account for air pollution system purchases of $10 billion.
A carbon tax in developed countries will cause industrial growth in countries without the tax. China could be a beneficiary. This will mean more Chinese coal-fired plants. China is now committed to install all the latest pollution control equipment on new boilers.
CO2 sequestration requires additional air pollution control investments. The scrubbers used to separate CO2 from the flue gas, will be furnished by the air pollution control industry. Furthermore, additional investment needs to be made to clean the gases prior to entering the CO2 scrubber.
A carbon tax would tend to accelerate development of technologies which require air pollution control systems. Ethanol plants need scrubbers and fabric filters.
There will be the acceleration of new concepts to make coal plants “green”. This will include manufacture of hydrochloric acid and co-location of ethanol plants at existing coal plant sites. This will increase air pollution equipment needs.
While the net effect will be positive, there will be negative aspects. The money spent to upgrade old plants would instead be diverted to building new coal-fired plants. Therefore, it would negatively impact those companies servicing and repairing equipment in the old plants.
The markets in Europe and other countries with the tax would be negatively impacted. Longer term, chemical, steel, pulp and other manufacturing plants would move to locations with cheaper energy and no carbon taxes.