Thursday, March 28, 2024
Hawai'i Free Press

Current Articles | Archives

Thursday, June 11, 2015
The Carbon Tax Charade
By Selected News Articles @ 10:53 AM :: 5551 Views :: Energy, Environment

The Carbon Tax Charade

Many fossil fuel producers will benefit, while the poor—and the economy—will suffer.

by Oren Cass, City Journal, June 8, 2015

As the carbon-tax bandwagon gathers steam, some interesting enthusiasts are jumping on board. Last week, six major European oil and gas companies sent the U.N. a letter of support “because,” according to a New York Times editorial, “they realize something must be done.” But who exactly is steering this bandwagon, and who is being taken for a ride? Big energy companies win big from a carbon tax. What’s good for business is often good for society as well, and industry support for a policy is by no means an indictment per se. But here those gains would come at the expense of low-income households and long-term economic growth, while failing to achieve the environmental objectives set out to justify a tax in the first place.

How do companies that produce fossil fuels benefit from a tax on fossil fuels? First, they don’t end up paying it. Most economists expect nearly the entire cost increase to be passed directly on to consumers through higher prices. Second, for many fossil-fuel producers, the tax will increase rather than decrease their business. The largest energy companies are traditionally focused on oil and natural gas. Coal, representing 30 percent of global energy supply and the largest primary fuel for generating electricity, would be badly damaged by a tax. The biggest beneficiary of the damage would be natural gas, which emits less carbon dioxide and would thus face a lower tax. If higher oil prices push consumers away from gasoline and toward electric cars, the electricity for those cars can come from natural gas as well.

Passing costs on to others while maintaining—or even growing—sales will minimize any effects on the industry. Much of the benefit to fossil-fuel producers from a carbon tax will come from a third factor: a fine is a price. That insight is the title of a paper by Uri Gneezy and Aldo Rustichini analyzing changes in parent behavior at preschools that imposed fines for late pick-ups. Counter intuitively, fines made parents more likely to arrive late. The sense of guilt that had once motivated them to arrive on time was replaced by a sense of permission to pay for the extra minutes of child care.

For energy producers, and all users of fossil fuels, a similar dynamic is at work. If a carbon tax is established at a price that economists and policymakers agree compensates society for the potential dangers of climate change, then anyone who wants to pay the price is implicitly welcome to emit the carbon dioxide. The result would presumably not be an increase in emissions as it was with increased late pick-ups. But paying the tax buys legal, economic, and moral permission for the very activity that the tax is designed to discourage. Energy producers get this benefit without even bearing the burden of the tax.

For the rest of society, perhaps the worst problem with a carbon tax is that it is extraordinarily regressive. Because poorer households spend a much greater share of their income on energy than do wealthier households, the price increases created by a tax eat up a greater share as well.Economists from the Brookings Institution and American Enterprise Institute found that a $15-per-ton carbon tax would cost the bottom 10 percent of households more than 3.5 percent of their income, and most taxes under consideration are two to three times higher. That’s the equivalent of a new income tax of 10 percent for the lowest-income households and 2 percent for the highest-income ones.

A rebate could offset this regressive effect, but sending a monthly check to every American has problems of its own (not least of them the de facto establishment of a guaranteed income). Unfortunately, analyses also consistently show that the economic drag of a new carbon tax could be counteracted only if the revenues from that tax are used to reduce corporate income-tax rates. Take your pick: a carbon tax that hurts the poor or a carbon tax that slows economic growth. Most likely we’ll get a carbon tax that does a little bit of both.

The entire exercise is supposed to be in service of reducing carbon-dioxide emissions and averting climate catastrophe. But the carbon-tax proposals under discussion cannot achieve their emissions-reduction targets, let alone make a noticeable dent in global emissions. Even a global tax—a political non-starter—would fail to push oil and gas prices any higher than they already were several years ago, a time at which environmentalists were hardly sanguine about the future. But once businesses and consumers are paying the “right price” for their emissions, where will the case be for other action?

There are political points to score with a carbon tax, and profits to capture, too. But these won’t benefit society; they will come at its expense.

---30---

Oren Cass is a senior fellow at the Manhattan Institute.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT