Manufacturers group: Carbon tax is a ‘bad idea’

A tax on carbon dioxide emissions became a hot political topic again after President Barack Obama promised to address climate change during his second term. However, a study by the National Association of Manufacturers has found that a carbon tax would be detrimental to the U.S. economy.

“The carbon tax is a bad idea,” said Jay Timmons, president and CEO of the National Association of Manufacturers, who added that manufacturing output could fall up to 15 percent if a carbon tax were to be imposed.

Carbon tax supporters have claimed that a carbon tax could be used to raise federal revenues to reduce the deficit, offset income and payroll taxes, and help curb global warming.

“A carbon tax can be expected to create an offsetting drag on the economy because it will make several major sources of energy more costly to use,” said Dr. Anne Smith, senior vice president and environmental group co-head at NERA Economic Consulting.

NERA conducted the study on behalf of NAM and looked at how a carbon tax would affect the economy, after taking into account the benefits of reducing federal debt and income tax rates. NERA analyzed two scenarios. One with a carbon tax of $20 per ton that would rise at a constant rate of 4 percent per year — similar to a carbon tax discussed by the Congressional Research Service and The Brookings Institution.

This policy only reduces carbon emissions by only 30 percent by 2053, far less than the 80 percent reduction that’s usually called for by lawmakers. Furthermore, economy would be reduced by $97 billion in 2023.

The second scenario mirrors the first for the first 10 years, but then carbon tax rates are ratcheted up “as much as necessary” to achieve an 80 percent emissions reduction goal by 2053. Under this scenario, economic growth would be reduced nearly $1.4 trillion by 2053.