The Cost of a Carbon Tax
Rep. Gary Palmer (AL-06)
Energy Innovation Agenda: Introduction
“A carbon tax has not proven to be either politically viable or really effective.”
Those aren’t my words; they are the words of a Democrat witness before she was cut off by a Member of Congress during an Energy and Commerce hearing. She was in the process of exposing the truth behind the carbon tax – it is bad policy that increases costs, mainly on the poorest among us, and will not achieve the global goals its proponents claim it will.
A carbon tax would drastically increase the cost of anything that uses, or was produced using, fossil fuel energy. Since fossil fuels made up 80% of all energy consumed in the U.S. in 2019, a carbon tax would lead to rising prices for everything from electricity, to food, to medical care. To make matters worse, the Congressional Budget Office found that the impacts of these higher costs would fall mostly on the poor: “The higher prices resulting from a carbon tax would tend to be regressive—that is, they would impose a larger burden (relative to income) on low-income households than on high-income households.”
When you think about how we use and consume energy, this makes sense. Those who cannot afford to live right next to their work due to the high cost of homes and rent must commute to and from work. A $40 per ton carbon tax would increase the price at the pump for these commuters by about 40 cents. With the national average around $2.87 a gallon, this would lead to over $3 gas in every state, and over $4.25 a gallon in California, even as people are still trying to recover economically from the COVID shutdowns.
Businesses would also be forced to pass these higher costs to consumers. Hospitals, with their energy intensive complexes, would be forced to raise prices to cover the costs of keeping their operating rooms at a safe temperature. Grocery stores that must have goods delivered would be forced to mark up the cost of food and goods to cover the higher fuel prices paid by their delivery drivers.
What is the benefit of adopting these economically damaging policies? Not much, according to John Christy from the University of Alabama at Huntsville. Using the United Nations’ own climate models, he found that if the U.S. never emitted another ounce of carbon, global temperatures would change “only 0.05 to 0.08 °C” after 50 years – “an amount less than that which the global temperature fluctuates from month to month.”
Why? Because taxing U.S. citizens does nothing to address global emissions. In fact, a domestically imposed carbon tax would result in increasing global emissions. Once again, this is an opinion shared by Democrats. A report put out by Senate Democrats’ Special Committee on the Climate Crisis last year noted the impact of policies that increase the cost of production in the United States. The report stated that, “we could see U.S. companies shift their production to countries less strict on carbon emissions.” It stated further, “This will not only lead to an increase in total global emissions, but also the outsourcing of American jobs.”
A domestically imposed carbon tax will also disadvantage U.S. resources in the global market, including resources that have a lower emissions profile than their competitors. For example, a carbon tax would reduce the global competitiveness of U.S. natural gas even though, according the Department of Energy’s National Energy Technology Laboratory, Russian natural gas exported to Europe has a lifecycle greenhouse gas emissions profile over 40% higher than U.S. liquified natural gas (LNG) exported to Europe. Handing Russia a global competitive advantage will result in higher global emissions. No doubt Vladimir Putin supports a carbon tax in United States.
Countries around the world have noted, embodied in their pledges under the Paris Agreement, natural gas is key to reducing their emissions. Making cleaner U.S. natural gas more competitive globally should be part of any rational strategy to reduce global emissions. A carbon tax does just the opposite. Similarly, U.S. agriculture is among the most efficiently produced in the world. A carbon tax would make cleaner U.S. agriculture production more expensive giving higher emitting competitors around the world an economic advantage. A policy that results in the loss of U.S. jobs, reduced competitiveness, and higher global emissions defies logic.
Plus, despite the rhetoric from my colleagues on the other side of the aisle, the U.S. is already the leader in reducing carbon emissions. The United States has reduced emissions more than the next twelve countries combined. This is largely due to the shale revolution and the transition to cleaner burning natural gas that brought about not only lower emissions but also lower energy costs. On the other hand, countries such as China are currently increasing their emissions. Since 2005, for every ton of carbon the U.S. has eliminated, China has increased its emissions by over 4 tons. Today, China’s annual emissions are more than the United States, European Union, and Japan combined. Furthermore, under the Paris Agreement, China is expected to increase their emissions by another 50% by 2030.
So, how should we respond? With the facts. The fact is that American innovation and technology, embraced by the free market, has allowed for the U.S. to lead the world in emissions reductions, and we can export these innovations and technologies around the world. We can further accelerate the deployment of these technologies by streamlining the current permitting process that delays newer and cleaner construction by 7 to 8 years. We can let facts, not fear, drive the process of developing safe next-generation nuclear plants that provide carbon-emission free energy. Finally, we can be realistic about the global landscape. Developing countries are not going to jump from burning wood, dung, and coal (if they’re lucky), to solar panels and wind turbines. But there is a chance that they can transition to reliable and affordable U.S. natural gas, while modernizing, if we continue building the infrastructure needed to export liquefied natural gas.
Unlike a carbon tax, these policies will lead to economic growth for all and a cleaner environment.
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