Elon Musk: Can Government Challenge Money?

While COP21 was underway in Paris, Tesla CEO Elon Musk visited the Sorbonne and talked to a group of graduate students about taxing carbon. His message was pretty simple, and cut through a lot of the rhetoric and confusion that often surrounds the issue. Basically, Musk said that people do what they're paid to do.

The problem is, right now people are being paid to release carbon into the atmosphere. According to the International Monetary Fund, governments throughout the world subsidize carbon-producing activity to the tune of $5.3 trillion annually. These subsidies come mostly in the form of not having to pay for the damage carbon-producing does to the environment. In economic terms, the environmental damage is an unpriced externality. Musk's point is that by allowing these damages to be ignored, society is lowering the cost of doing business for carbon-producing companies. This gives them an economic advantage -- especially over companies producing less carbon.

Musk's solution to the problem is to tax carbon emission. This would eliminate the subsidy and put high carbon-producing companies on a level economic playing field with low carbon-producing companies. The increased costs experienced by high-carbon producers would be reflected in higher prices, and the market would move toward low-carbon solutions. The high-carbon companies would have an economic incentive to invest in lower-carbon technologies, and consumers would have a compelling reason (lower prices) to buy low-carbon products.

The big question, it seemed to me while listening to the talk and the QA session that followed it, is whether governments still have the power to do it?

Musk was optimistic that "governments respond to popular pressure" and that the young people he was addressing had the power to lead a movement for change. But after a grad student asked him if the answer was for sustainability activists to send more lobbyists to Washington, he said this:

Tesla and Solar City, my companies are very tiny. We're tiny, tiny companies. In order for there to be a big move toward sustainability, the giant companies have to know that that is what the governments are demanding for the future; what the people are demanding for the future...Let me tell you, we definitely can't beat the oil and gas industry on lobbyists. Okay? That would be a losing battle...Exxon makes more profit in a year than the value of the entire solar industry in the Unites States. So if you take every solar company in the United States, it's less than Exxon's profit for one year. There's no way you can win on money. It's impossible (at about 45:00).

I thought that was an honest way to frame the issue. Can government win against money anymore?