A Carbon Tax Will Drive Up Energy Prices and Damage Economy

By March 12, 2013Economy

Today, Representatives Henry Waxman and Earl Blumenauer and Senators Sheldon Whitehouse and Brian Schatz released a discussion draft of legislation that proposed to place a carbon tax on greenhouse gas emissions.  The lawmakers are seeking input on various aspects of their legislation, including the tax rate and how revenues will be spent.  The discussion draft and related background materials can be found here.

Late last month, the National Association of Manufacturers released the results of a study looking at the economic consequences of a carbon tax. The study, conducted by NERA Economic Consulting, examined two carbon tax scenarios: one levied at $20 per ton increasing at 4 percent and the other designed to reduce carbon dioxide (CO2) emissions by 80 percent. Revenues were recycled into deficit reduction and reduction of income tax rates.  Both scenarios modeled ($20 a ton and 80% reductions) had a devastating impact on the economy and manufacturers.

NERA concluded that the increased costs of coal, natural gas and petroleum products due to a carbon tax would ripple through the economy, resulting in higher production costs, less spending on non-energy goods, fewer jobs and slower economic growth. Nationally, a carbon tax designed to reduce CO2 levels by 80 percent could place tens of millions of jobs at risk and raise gasoline prices by over $10 a gallon, natural gas prices by almost $60 per MMBtu, and residential electricity prices by over 40 percent.

Our study also found that a carbon tax would have a negative impact on manufacturing output. In energy-intensive sectors manufacturing output could drop by as much as 15.0 percent and in non-energy-intensive sectors by as much as 7.7 percent. The impact on jobs would be substantial, with a loss of worker income equivalent to between 1.3 million and 1.5 million jobs in 2013 and between 3.8 million and 21 million by 2053.

A carbon tax resembling the one in our study would drive up energy prices, make it more expensive to manufacture in the United States, and harm our ability to compete with other nations. The NAM believes that any benefits of a carbon tax—under both carbon tax cases—would be far outweighed by the negative impacts to the overall economy.

Ross Eisenberg is vice president of energy and resources policy, National Association of Manufacturers.


Ross Eisenberg

Ross Eisenberg

Ross Eisenberg is vice president of energy and resources policy at the National Association of Manufacturers (NAM). Mr. Eisenberg oversees the NAM’s energy and environmental policy work and has expertise on issues ranging from energy production and use to air and water quality, climate change, energy efficiency and environmental regulation. He is a key voice for manufacturing on Capitol Hill, at federal agencies and across all forms of media.
Ross Eisenberg

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