New study questions claims made by carbon tax supporters

By Jason Hopkins

A study released Wednesday casts doubt on many of the assurances made by carbon tax supporters, revealing such a fee on emissions would not bring substantial benefits to the environment or the economy.

Calls for implementing a carbon tax — a fee imposed on large emitters of carbon — have been growing in the U.S. Lawmakers from both parties have introduced their own versions of carbon pricing legislation in Congress, while some of the largest oil and gas companies in the world have signed on to initiatives promoting the implementation of a carbon tax in the U.S.

Carbon tax proposals are also gaining steam at the state level as well. The battle over whether to pass a carbon fee in Washington state is on track to become the most expensive campaign initiative in the state’s history, with both sides already dropping around $45 million to sway voters.

Supporters of carbon pricing argue it’s a market-oriented approach to reducing greenhouse emissions — and more efficient than simply piling the generation industry with more environmental regulations. Americans for Carbon Dividends, a self-proclaimed conservative organization that is lobbying for a carbon tax in Congress, argues such a plan would be revenue neutral, allowing consumers to collect tax revenue made from carbon polluters.

However, a study commissioned by the Institute for Energy Research (IER) finds that many of these outcomes would not necessarily come to fruition.

Among the study’s key findings: The majority of carbon tax scenarios would actually lower the country’s growth domestic product (GDP); it would not produce high amounts of tax revenue, with a carbon fee likely to generate a net revenue of only 32 cents on the dollar; the reduced GDP would greatly impact state budgets, where state and local governments would see around $18.9 to $30.6 in lost revenue in the first decade of a carbon tax implementation.

“The study is a macroeconomic analysis of six current representative carbon tax proposals that were scored using scoring conventions similar to those used by [the Joint Committee on Taxation, Congressional Budget Office], and the Treasury Department,” explained IER communications manager Erin Amsberry in a statement.

Additionally, the analysis found that a carbon tax would not put the U.S. on track to meet emission reduction targets set out in the Paris climate accord — the 2015 international agreement that nearly all counties are using as a gauge to lower greenhouse gas emissions.

The IER study was conducted by James Lucier, a managing partner at Capital Alpha Partners, LLC, a policy research firm based in Washington, D.C.

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Image courtesy of Mario Roberto Durán Ortiz/Wikimedia Commons

2 thoughts on “New study questions claims made by carbon tax supporters

  1. Any tax, including a carbon tax, passing through the hands of government suffers from “the sticky fingers syndrome”, 2 dollars go in, about 1.5 dollars come out. The difference stays to feed the growing government bureaucracy.

    The key word missing in most discussions is UNILATERAL. VT’s government imposing on Vermonters a unilateral carbon tax is like shooting them in the feet.

    If the carbon tax were nationwide, I would support it.

    The carbon tax would:

    – Impose a $10/ton tax of carbon emitted in 2017, increasing to $100/ton in 2027.
    – Generate about $100 million in state revenue in 2019, about $520 million in 2027.
    – Be added to the fuel prices at gas stations and fuel oil/propane dealers.
    – Drivers should expect a tax increase of 9 c/gal of gasoline in 2018, increasing to about 89 cents in 2027.
    – Homeowners, schools, hospitals, businesses, etc., should expect a tax increase of 58 c/gal of propane and $1.02/gal of heating oil and diesel fuel in 2027.
    – A typical household (two wage earners, two cars, in a free-standing house) would pay additional taxes in 2027 of about:
    – Some of the carbon tax extortion would be at the pump, some when the monthly fuel bills arrive, and some as higher prices of OTHER goods and services.

    Driving = $0.89/gal x 2 x 12000 miles/y x 1/(30 miles/gal) = $712/y
    Heating = $1.02/gal x 800 gal/y = $816/y
    Total carbon tax in 2027 = $1528/y
    Sales tax reduction 5/6 x 1400 = $233/y
    Net tax increase = $1295/y

    – The hypocritical sop of reducing the sales tax from 6 to 5 percent would save that household about $233 in sales taxes, for a net loss of $1295 in 2027. That means such households, the backbone of the Vermont economy, would have about $1300/y less to make ends meet.
    – Many of these households have had stagnant or declining, spendable real incomes (after taxes, fees, surcharges; other recurring expenses, etc.), plus dealing with a near-zero, real-growth Vermont economy, since 2000.
    – With less real income, and higher real prices for goods and services, they also would have to make their own energy efficiency improvements.
    http://watchdog.org/250281/carbon-tax-debate-vermont/

  2. The Vermont Comprehensive Energy Plan, CEP, goal aims to “transform” the Vermont economy. It would require investments of about $33.3 billion, about $1 billion per year for 33 years, during the 2017 – 2050 period, per Vermont Energy Action Network 2015 Annual Report. The CEP could not be implemented without a very high carbon tax and other taxes, surcharges and fees of at least $970 million per year for 33 years.

    Carbon Tax Another Headwind for the Vermont Economy: Vermont’s government is almost always short of money. It promises to give back money? Why take it in the first place? Vermont’s government likely would disburse the carbon tax revenues to favored subsidy-dependent constituencies, per “economic development policy”. About 5% of the $520 million to be raised by the carbon tax would be government overhead for doing the “disbursing”.

    If the carbon tax bill were enacted, special interests, seeing this large source of funds, would pile on it, and grab as much of it as possible, as happened with the ARRA funds a few years ago. The Vermont approach would be complicated and lead to more bureaucracy and rules and regulations. It would definitely not be hands-off.

    For Vermont to impose a unilateral carbon tax would make its economy less competitive versus other states, i.e., more brain drain, and fewer good-paying, steady, full-time jobs, with good benefits in the private sector. The carbon tax would be another headwind for the near-zero, real-growth Vermont economy.

    The carbon tax would further aggrandize Vermont’s government, which is too large, too inefficient, spending too much money, is bloated with programs, and is running annual deficits, that are offset with annual increases of taxes, fees and surcharges, as if money grows on trees.

    The carbon tax would transfer up to $520 million per year, less sales tax reductions, into incompetent, inefficient government hands for “disbursements”; EB-5, Health care website, Montpelier Heating Plant, etc. come to mind.

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