Setting the Record Straight on a Carbon Tax

This morning, the Washington Post editorial board again called for a carbon tax with the piece “Carbon tax is the best option Congress has.”  It’s the second time in the last two months (and fourth in the past six months) the Post has called for this tax, which has the potential to hurt jobs and our economy. It’s a surprising amount of attention for a concept that has little to no political legs in Congress.

Congress isn’t talking about a carbon tax because when a cap-and-trade bill like Waxman-Markey is labeled a “job-killing energy tax” and can’t win support in the Senate, it’s hard to get behind a bill that would impose an actual energy tax.

Also, a carbon tax does not appear to be the economic or environmental panacea the Post is making it out to be.  A recent economic study for the NAM conducted by the nonpartisan NERA Economic Consulting looked at 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. In both cases, any revenue raised by the carbon tax would be far outweighed by the negative impact to the overall economy.

Both cases would hurt families and businesses, resulting in higher prices for natural gas, electricity, gasoline and other energy commodities.  The $20/ton case reduces U.S. CO2 emissions by only about 30 percent, a much smaller amount than was called for in Waxman-Markey and by leading climate advocates.  To get to the levels they are seeking, 80 percent reductions by 2050, the economic costs skyrocket.

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, residential electricity prices by over 40 percent, and natural gas prices by almost 600 percent. Manufacturing output could drop by as much as 15.0 percent in energy-intensive sectors and 7.7 percent in non-energy-intensive sectors. The overall 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.

Last week, the NAM and 54 other manufacturing associations sent a letter to the leadership of the Senate Finance Committee and the House Ways and Means Committee outlining the damage that would be caused by a carbon tax. As both committees begin to debate tax reform its important they understand the consequences of such a tax on jobs and manufacturing. The letter was also delivered to the leadership of the Senate Environment & Public Works Committee and House Energy and Commerce Committee.

Manufacturers are committed to protecting the environment through greater environmental sustainability, increased energy efficiency and conservation and reducing greenhouse gas (GHG) emissions. Led by manufacturers’ innovations in energy development and efficiency, U.S. greenhouse gas emissions are as low today as they were in the mid-1990s,  while manufacturing gross output increased 29% during that period. Even more remarkable is that these emissions reductions have taken place while China, the world’s largest emitter, has seen emissions more than double over that same time period.

Manufacturers continue to develop and implement measures that use energy more efficiently, utilize alternative sources of energy, and develop new technologies leading to fewer greenhouse gas emissions. Through innovation, manufacturers have led a quantum shift in energy production in this country that, along with the potential to create millions of new jobs, will help lead to a sustainable future for generations to come.

Again and again manufacturers have shown that we hold the solutions to many of our environmental challenges. We should therefore be careful not to impose policies that could stifle innovation, manufacturing growth and hurt jobs.

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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