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…]