American Petroleum Institute

Carbon tax advocates say Congress should slap a price penalty on fossil fuels to make consumers bear the “social cost of carbon” (SCC) — the damage carbon dioxide (CO2) emissions allegedly inflict on public health and welfare via their presumed impacts on global climate.

What is the SCC? Depends on who you ask. Climate “hot heads” like Al Gore think the SCC is huge. “Lukewarmers” like Patrick Michaels think the SCC is less than the cost of the tax or regulatory burden required to make deep cuts in CO2 emissions. “Flatliners” like Craig Idso think the SCC is negative (i.e. CO2’s net impact is beneficial), because a moderately warmer climate is healthful and CO2 emissions nourish the biosphere.

In February 2010, the EPA and 11 other agencies issued a Technical Support Document (TSD) on the SCC. The TSD’s purpose is to enable federal agencies to incorporate the “social benefit” of CO2 emission reductions into cost-benefit estimates of regulatory actions.

The TSD recommends that agencies, in their regulatory impact analyses, use four SCC estimates, ranging from $5 per ton to $65 per ton in 2010:

For 2010, these estimates are $5, $21, $35, and $65 (in 2007 dollars). The first three estimates are based on the average SCC across models and socio-economic and emissions scenarios at the 5, 3, and 2.5 percent discount rates, respectively. The fourth value is included to represent the higher-than-expected impacts from temperature change further out in the tails of the SCC distribution.

Here’s where it gets interesting. Both the federal and state governments levy taxes on motor fuel. Motor fuel taxes are not called carbon taxes but their economic effect is the same — impose a price penalty on consumption. Moreover, via simple arithmetic any carbon tax can be converted into an equivalent gasoline tax and vice versa.

The point? Americans in every state except Alaska already pay a combined federal and state gasoline tax that is higher than a carbon tax set at $5, $21, or $35 per ton. Americans in five states pay a combined gasoline tax that is higher than a $65 per ton carbon tax. Americans in several other states pay a combined gasoline tax that is nearly as high as a $65 per ton carbon tax.    [click to continue…]