carbon tax

One Million Fewer Jobs Created by 2016 under ‘Modest’ Carbon Tax

by Marlo Lewis on January 14, 2013

in Features

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Heritage Foundation economists David Kreutzer and Nicolas Loris have posted an assessment of the economic impacts of a carbon tax that starts out at $25 per ton and increases by 5% annually (after adjusting for inflation). Rather than use industry data or assumptions, they compare two policy scenarios (“side cases”) from the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2012.

Specifically, Kreutzer and Loris compare projected household income, utility bills, gasoline prices, and job creation in the $25 per ton carbon tax side case and the no-greenhouse-gas-concern side case, a scenario in which energy investors face no risk of a carbon tax or greenhouse gas (GHG) regulation.  

Here’s what they found. A ‘modest’ carbon tax, as described above, would:

  • Cut the income of a family of four by $1,900 per year in 2016 and lead to average losses of $1,400 per year through 2035;
  • Raise the family-of-four energy bill by more than $500 per year (not counting the cost of gasoline);
  • Cause gasoline prices to increase by up to $0.50 gallon, or by 10 percent on an average gallon price; and
  • Lead to an aggregate loss of more than 1 million jobs by 2016 alone. [click to continue…]

Where Does ExxonMobil Stand on Carbon Taxes? (Updated Dec. 27, 2012)

by Marlo Lewis on December 11, 2012

in Features

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Yesterday on NPR’s radio program To the Point, I said it was dishonorable for ExxonMobil to support a carbon tax. I compared ExxonMobil’s reported embrace of carbon taxes to Enron’s lobbying for the Kyoto Protocol.

Enron was a a major natural gas distributor and saw in Kyoto a means to suppress demand for coal, natural gas’s chief competitor in the electricity fuel market. ExxonMobil is a major natural gas producer. So I took this to be another case of political capitalism – corporate lobbying to replace a competitive market with a rigged market to enrich a particular firm or industry at the expense of competitors and consumers.

The NPR program host said something like “even oil companies like ExxonMobil now support a carbon tax,” alluding to a Nov. 16 Bloomberg Businessweek article titled ”Carbon Fee From Obama Seen Viable With Backing From Exxon.” I too had read the article, and ExxonMobil’s reported behavior struck me as imprudent as well as unkosher. A carbon tax could come back to bite natural gas producers big time if the EPA decides, along the lines of Cornell University research, that fugitive methane emissions from hydraulic fracturing make natural gas as carbon-intensive as coal.

The Bloomberg article quoted an email from ExxonMobil spokesperson Kimberly Brasington:

Combined with further advances in energy efficiency and new technologies spurred by market innovation, a well-designed carbon tax could play a significant role in addressing the challenge of rising emissions. A carbon tax should be made revenue neutral via tax offsets in other areas.

As explained previously on this site, a revenue-neutral carbon tax is a political pipedream, as is a carbon tax that preempts EPA and State-level greenhouse gas regulations. ExxonMobil is too savvy not to know this. So I interpreted Brasington’s caveats (“combined,” “well-designed,” “revenue-neutral”) to be the typical K Street evasiveness of those wishing to signal rather than declare their support for a controversial policy.

But articles published today in FuelFix and The Hill contend that ExxonMobil “does not support” a carbon tax and is “not encouraging policymakers” to impose such a tax. Both articles quote ExxonMobil VP for public affairs and government relations Ken Cohen:

If policymakers are going to adopt a measure, a regime to affect or put in place a cost on the use of carbon across the economy, then as we look at the range of options, our economists and most economists would support a revenue-neutral, economy-wide carbon tax as the most transparent and efficient way of putting in place a cost on the use of carbon.

Not supporting and not encouraging is not the same as opposing. Indeed, not opposing while saying But if you’re gonna do it, do it like this! can be a low-profile way to support and encourage! Also, why say anything favorable about carbon taxes when cap-and-trade is dead and there’s no longer even a weak prudential case for supporting carbon taxes as the lesser evil? [click to continue…]

Carbon Tax? Sorry, I Already Gave at the Office Gas Pump

by Marlo Lewis on August 10, 2012

in Blog, Features

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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…]

Congressman Introduces Carbon Tax Bill

by Marlo Lewis on August 2, 2012

in Features

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Today, Rep. Jim McDermott (D-Wash.) introduced the “Managed Carbon Price Act of 2012″ (MCP), a bill imposing a tax on carbon dioxide-equivalent  greenhouse gas (GHG) emissions from producers of coal, oil, and natural gas, refineries, and other covered sources. The MCP has roughly the same long-term goal as the Waxman-Markey cap-and-trade bill, the Copenhagen climate treaty, and California Assembly Bill 32 — an 80% emissions reduction below 2005 levels by 2050.

Under the MCP, covered sources would have to purchase (non-tradeable) permits equal to the quantity of CO2-equivalent GHGs they emit. The Secretary of Treasury, in consulatation with the Secy. of Energy and Administrator of EPA, would “manage” permit prices to ensure that both the long-term and interim reduction targets are met. Permit prices would have to stay within a maximum and minimum “price collar.” Seventy-five percent of the proceeds would be returned to citizens as “dividends,” and 25% would be applied to deficit reduction. A fact sheet, section-by-section analysis, and side-by-side comparison with last year’s version of the bill provide more detail.

A few quick observations. First, the overwhelming majority of Republican members of Congress have signed the Taxpayer Protection Pledge – a promise to the citizens of their State or district not to support any tax increase that is not offset by an equal reduction in other taxes. Because 25% of the proceeds raised by the ‘managed’ carbon tax would be applied to deficit reduction, the MCP is not ‘revenue-neutral.’ Pledge takers cannot vote for the MCP without breaking their promises to their constituents. Even if some GOP lawmakers agree with the bill’s climate policy objectives, few will dare to support it. [click to continue…]

George Shultz Endorses Carbon Tax – You Were Surprised?

by Marlo Lewis on July 13, 2012

in Features

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Yes, that George Shultz, President Ronald Reagan’s Secretary of State. But not everyone who served with Reagan was a Reaganite. Reagan’s VP, G.H.W. Bush, famously campaigned on a platform of “Read my lips: No New Taxes.” Not two years later he raised taxes in a 1990 budget deal that torpedoed the economy and sank his presidency.

Yesterday, in an interview puff piece penned by two associates, Shultz, a distinguished fellow at Stanford University’s Hoover Institution, called for a ‘revenue-neutral’ carbon tax. This is unsurprising. As the article reminds us, in 2010, Shulz, partnering with Tom Steyer, a Democrat, “led the successful campaign to defeat Proposition 23, a California ballot initiative to suspend the state’s ambitious law to curb greenhouse gases.”

Nothing in the article indicates that Shultz thinks a carbon tax should replace California’s cap-and-trade regime established by AB 32. Nor is there any hint that Shultz would condition the enactment of carbon taxes on repeal of the EPA’s court-awarded power to regulate greenhouse gases via the Clean Air Act.

This pattern is becoming boringly familiar. [click to continue…]

More on the Carbon Tax Cabal

by Marlo Lewis on July 12, 2012

in Features

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Concerning the “Price Carbon Campaign/Lame Duck Initiative” meeting of center-right and ‘progressive’ pols, wonks, and activists yesterday at the American Enterprise Institute (AEI), herewith a few additional thoughts.

Today’s Greenwire quotes AEI economic policy director Kevin Hassett saying that AEI was just playing host and the meeting was just information sharing. Well, okay, let’s assume he experienced it that way, but what about the ‘progressives’ who set the agenda? They must really be into sharing, because this was their fifth meeting. Whatever the AEI folks thought the event was about, the agenda clearly outlines a strategy meeting to develop the PR/legislative campaign to promote and enact carbon taxes.

During the cap-and-trade debate in the last Congress, there was something of a consensus among economists that EPA regulation of greenhouse gases (GHGs) is the worst option, a ‘comprehensive legislative solution’ (i.e. cap-and-trade) has less economic risk, and a carbon tax is the most efficient option. But the ‘progressives’ in the “Price Carbon Campaign” are pushing for carbon taxes on top of EPA regulation.

Because the meeting was non-public and hush-hush, we may never know who said what. Here are some points the ‘conservative’ economists  should have made: [click to continue…]

AEI Hosts Fifth Secret Meeting to Promote Carbon Tax

by Marlo Lewis on July 11, 2012

in Features

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Today, the American Enterprise Institute (AEI), a prominent conservative think tank, hosted a secret, four-and-a-half hour meeting of pols, wonks, and activists, including several self-identified ’progressives,’ to develop a PR/legislative strategy to promote and enact a carbon tax. This was the fifth such meeting to advance the ”Price Carbon Campaign/Lame Duck Initiative: A Carbon Pollution Tax in Fiscal and Tax Reform.” An annoted copy of the meeting agenda appears at the bottom of this post.

Perhaps not coincidentally, earlier this week former GOP Congressman Bob Inglis of South Carolina launched the Energy and Enterprise Initiative, an organization promoting carbon taxes. Inglis obtained funding for the project from the Rockefeller Family Fund and the Energy Foundation, both left-leaning foundations.

Left-right coalitions can be principled and desirable. For example, I worked with environmental groups to help end the ethanol tax credit, and I work with them now to develop the case for eliminating the ethanol mandate. We collaborate because we share the same policy objective, even if not always for the same reasons. The free marketers want to end political meddling in the motor fuel market and the environmentalists want to end federal support for a fuel they regard as more polluting than gasoline. The common objective is consistent with each partner’s core principles.

But such cases are the exception rather than the rule. In general, when left and right join forces, the appropriate question is: Who is duping whom?

My colleague Myron Ebell sent out an alert about the AEI-hosted carbon tax cabal earlier today. It appears immediately below: [click to continue…]

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Will Australia Enact Carbon Taxes?

by Marlo Lewis on June 3, 2011

in Features

Aussie Labor Party Prime Minister Julia Gillard is waging an aggressive PR campaign to sell carbon taxes in the Land Down Under. Resistance is fierce, with opposition leaders saying the tax “is so toxic that Labor MPs could dump her to save their own seats” (The Australian, June 3, 2011).  [click to continue…]

Xcel Energy’s Versatile, Profitable Carbon Tax

by William Yeatman on May 5, 2011

in Blog, Features

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To my knowledge, Colorado is the only state in which regulators allow utilities to incorporate a carbon tax into the economic models used to make resource acquisition decisions (see here and here). Ratepayers can’t see it in their monthly bill, but the tax is used in the models, and the models dictate spending. It’s the worst kind of virtual reality: The carbon tax leaps from computers to ratepayer wallets.

The Colorado Public Utilities Commission was authorized to allow for a carbon tax in 2008 with the passage of HB 1164 by the General Assembly. The legislation was advertised as an essential component of former Governor’s Bill Ritter’s environmentalist “New Energy Economy,” but, in practice, the carbon tax has served as an accounting loophole through which Xcel Energy, the largest investor-owned utility in the State, has awarded itself big time profits. In a previous post, I explained in some detail how Xcel uses the carbon tax. Here are a few examples:

  • One of Xcel’s priorities is winning market share from independent power producers on the wholesale electricity market. Older natural gas plants are Xcel’s fiercest competitors, because they have already paid off their capital costs, so they can bid electricity prices relatively low. The $20/ton carbon tax eliminates this advantage, because new plants are more efficient than older plants. It tilts the playing field to Xcel’s favor.

Canadian Election Results: No Cap-and-Trade, No Carbon Tax

by Myron Ebell on May 3, 2011

in Blog, Features, Politics

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The stunning victory by Stephen Harper’s Conservatives in Canada’s election means the death of cap-and-trade or a carbon tax in Canada.  The Conservative Party’s platform firmly opposed both cap-and-trade and carbon taxes. The Liberal Party, which was annihilated in the election, equally strongly supported imposing a cap-and-trade scheme to reduce greenhouse gas emissions.

Conservatives won  a clear majority of 167 seats in the 308-member federal Parliament.  They had formed a minority government since 2007.  For the first time in Canadian history, the Liberal Party dropped to third place with 34 seats.  The hard left New Democratic Party (NDP) wiped out the Bloc Quebecois in Quebec and will become the official opposition with 102 seats.  The NDP and the Bloc Quebecois also support cap-and-trade.  The Green Party won its first seat in Parliament.

This is another clear sign that public support for cap-and-trade and other energy-rationing policies is waning.  Cap-and-trade has been dead in the United States since the Waxman-Markey bill narrowly passed the House of Representatives on June 26, 2009.  And in Australia, the Labour Party government is in deep trouble as a result of proposing a carbon tax.  The global warming fad appears to be fading fast.

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