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The cost certainty that inherently exists in a carbon tax is also effective
in encouraging investments in sustainable technology and energy efficiency. This
stable price of emissions is beneficial for investors of power plans and
factories because future planning regarding these assets is easier when there
is less fear of price fluctuations. Depending on a firm’s marginal costs of
abatement, it may be more cost-effective to turn to more sustainable practices
and improve process optimization. Therefore, a tax on carbon also serves to
incentivize converting to clean energy, which creates an increase in demand for
jobs in this industry. Lowering emissions in turn lowers dependence on fossil
fuels, and less dependence results in an easier transition to renewable energy
and eventually a decarbonized society. Renewable energy is already becoming
more cost-effective, particularly solar and wind, which costs about 12.2 cents
per kWh and 8.2 cents per kWh, respectively (Lin, 2011). Utilizing the carbon tax to also help induce green
innovation aids in lowering the costs of renewable energy sources further, potentially
to the point of becoming cheaper than non-renewables (Meltzer, 2014).

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