The Competitive Enterprise Institute has a new video out today featuring Senior Fellow Marlo Lewis which explains why adopting a carbon tax in the United States would be a bad idea.
Marlo comments in today’s news release:
A carbon tax is a pernicious idea because it can dramatically increase costs for Americans on a range of necessities without presenting them with a tax bill. In addition to higher costs for energy, businesses that consume energy—like shipping companies, travel services, agriculture and more—will also pass increased costs onto consumers.
Marlo has been a leader in warning otherwise sound thinkers away from the idea that a carbon tax would be a reasonable compromise solution to climate change challenges—that is, between radical decarbonization on the one hand and the status quo on the other. There are multiple organizations these days with staff hailing from right-of-center political backgrounds making such a case.
Ben Zycher at the American Enterprise Institute has also been neck-deep in this debate, as can be seen in his recent report “Observations on the Alliance for Market Solutions’ ‘conservative’ case for a carbon tax.” In the report, Zycher focuses on a specific proposal that would use the imposition of a new carbon tax to finance an equivalent reduction in other taxes (while lowering carbon dioxide emissions in the U.S.), but also covers many of the objections to carbon taxes in general:
Because a carbon tax—and thus the intended reduction in [greenhouse gas] emissions—must be chosen by government, it is not a “market” policy. Notwithstanding the view of many economists, it is likely to prove less efficient economically than a regulatory approach because the revenue stream from a tax would provide incentives for policymakers to choose the tax rate that maximizes the present value of the revenue stream over some time horizon rather than the rate that optimizes emissions.
Economist Jim Lucier of Capital Alpha Partners has also analyzed several allegedly “conservative” carbon tax scenarios in which the negative impact of new taxes are ostensibly offset by a reduction in existing tax or regulatory burdens. His findings were not encouraging for such a gambit:
A special focus of our study is the role of a carbon tax as a revenue raiser in pro-growth tax reform. There have been many suggestions that a “tax swap” of growth-oriented tax cuts financed by a carbon tax could produce incremental economic growth. We find that this premise would be difficult to achieve using standard scoring conventions. We also examine the possibility of a tax-for-regulatory swap in which a carbon tax would replace all existing regulation and still allow the United States to meet its obligations under the Paris Agreement. We find this premise difficult to achieve as well. A carbon tax would reduce emissions but could still only achieve Paris Agreement obligations as a part of a comprehensive carbon mitigation plan. This is in agreement with World Bank and International Energy Agency (IEA) conclusions and is consistent with the [U.S. Department of the] Treasury’s own modeling.
For more on the costs of the Paris Climate Agreement, see the study by Marlo Lewis and Chris Horner, “The Legal and Economic Case Against the Paris Climate Treaty: Canceling U.S. Participation Protects Competitiveness and the Constitution” from May 2017.