While the US Government is working on the fine print of a new carbon regulatory system, one thing is clear: we are all going to face a new tax. It's important that business leaders avoid the mistake of thinking this will be a new burden assessed on just a few, like the chemical industry and power utilities. Carbon is ubiquitous — part of every industry, and indeed, every human activity — from pharmaceuticals to farming to family field trips. This tax is inescapable, yet where and how hard it will hit is very hard to predict.
It's unpredictable because of the astonishing variation in both how the rules on upstream businesses will work their way to yours, and in the timing and amount of the tax itself. As of this writing, for example, there are a number of allowances in the Waxman-Markey bill so that electric utilities and other high carbon intensity industries won't have to buy pollution permits in the early years of a new cap and trade system. With a complicated policy patchwork to figure out, the application of this new system will feel quite random — especially to consumers, and to those suppliers who are part of long, complex industry value chains.
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