Elon Musk says the No. 1 way to decrease carbon dioxide emissions would be to levy a tax on carbon.

“My top recommendation, honestly, would be just add a carbon tax,” Musk told Joe Rogan on The Joe Rogan Experience podcast on Thursday. “The economy works great. Prices and money are just information. … If the price is wrong, the economy doesn’t do the right thing.”

Currently, there is no direct monetary consequence for businesses and industries whose production releases greenhouse gasses into the atmosphere; in other words, it is free to create green house gasses, the most common and pervasive of which is carbon dioxide. Carbon dioxide is released when fossil fuels, like coal and gas, are burned. Excess carbon dioxide in the atmosphere traps heat and causes global warming.

Musk calls carbon concentrations in the atmosphere and environment an “unpriced externality.” An externality happens when some consequence of production is not properly reflected in the market. In this case, it is a negative externality.

A carbon tax would change that. “If we just put a price on [carbon emissions], the market will react in a sensible way. But because we don’t have a price on it, it is behaving badly,” Musk says.

Musk suggested a tax at the point of consumption. (A consumption tax is one that is levied at the point of consumption, when someone buys something, where an income tax is one where you earn income or collect interest, capital gains and the like, according to the Brookings Institution.)

He also suggested the tax be “non-regressive,“ meaning the tax could be levied based on income level. If a “low income” consumer who has to use a lot of gas (and therefore produce a lot of carbon emissions), they could get a “tax rebate,” Musk said as an example. “That’s the way to do it.”

“This is obviously a thing that should happen,” Musk said.

Musk told Rogan he had talked to the Biden administration about implementing a carbon tax. According to Musk, at the time, the administration said it seemed “too politically difficult.” A White House spokesperson did not immediately respond to CNBC Make It’s request for comment.

Kaynak: CNBC