Politics

Manufacturers group: Carbon tax is a ‘bad idea’

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Michael Bastasch Contributor
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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.

Job losses would also be high under both scenarios — approximately 3.8 million in 2053 under the first, and nearly 21 million by 2053 under the 80 percent reduction scenario.

President Obama came out in favor of a “market-based” solution to climate change in his State of the Union address, but the administration has repeatedly said that it had no plans to propose a carbon tax.

“The administration has not proposed a carbon tax, nor is it planning to do so,” Treasury secretary nominee Jack Lew wrote in a response to Utah Sen. Republican Orrin Hatch.

However, liberal senators quickly moved to introduce climate legislation that would put a price on carbon dioxide emissions in response to President Obama’s call for Congress to act on climate change.

“It can reverse greenhouse gas emissions in a significant way,” said Vermont independent Sen. Bernie Sanders. “It can create millions of jobs as we transform our energy system away from fossil fuel and into energy efficiency and such sustainably energies as wind, solar, geothermal and biomass.”

Brookings Institution fellow Adele Morris writes that a carbon tax of $16 per ton that rises 4 percent per year would reduce the deficit by $815 billion over twenty years.

Republicans have recently sought to ask Obama about whether or not he would support such a tax.

“Given the Administration’s statements that you do not support and would not propose a carbon tax, given your consistent rhetorical support for the new unconventional production of natural gas and oil, and given your budgetary and rhetorical support for clean coal, I write to ask for your thoughts about the proposed legislation, as well as any Administration position on the legislation,” wrote Louisiana Republican Sen. David Vitter in a letter to Obama.

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