As early as this week, the House of Representatives is set to vote on House Concurrent Resolution 119, “Expressing the sense of Congress that a carbon tax would be detrimental to the United States economy.” The argument being made by the sponsors of this resolution is that a carbon tax would result in job losses and lead to higher prices for families and small businesses, while jeopardizing American energy security. In actual fact, all three of these claims are to various degrees mistaken or misleading.
For starters, what is a carbon tax? It’s a price levied on the extraction of greenhouse gas-emitting energy sources in direct proportion to how much they emit. It serves to incentivize conservation, innovation in green technologies and energy efficiency, and it does this by increasing the price of goods across the economy.
Let us take as example one model carbon tax, the Carbon Fee and Dividend (CF+D) proposal of the Citizens Climate Lobby. Does CF+D increase prices for consumers? Only in the narrowest sense. The “dividend” in the proposal’s name refers to the direct return of the money raised to the American taxpayers. The overhead is low and is handled directly by the Treasury. Thus, the carbon fee is less a tax and more a benefit to be earned by good carbon behavior. Because the median American consumer has a smaller carbon footprint than the mean American consumer, CF+D actually deposits money in the bank accounts of the majority of Americans, on net.
Now let us look at the claim of job losses. A carbon fee would shift jobs within the energy sector. Coal, and to a lesser degree oil, would see price hikes relative to nuclear, wind and solar, and the displacement of workers is a legitimate concern. But America would not be the innovative country it is if we refused to transition to any technology, however beneficial, that required some economic disruption. Moreover, a study by Regional Economic Models Inc. indicates that the CF+D proposal in particular would add 2.8 million jobs to the economy above its expected baseline performance absent such a policy by 2035. These jobs actually come predominantly not in the energy sector, but in labor-intensive industries such as health care and retail, which would be the indirect beneficiaries of the dividend.
Lastly, there is the claim that a carbon tax would jeopardize American energy security. Such a claim could not be further from the truth. An intelligently crafted carbon tax such as the CF+D proposal would have a border adjustment, causing the same price to be added to imported energy, at least where the country of origin does not levy a similar price. Our primary foreign dependence on energy comes in the form of oil, and virtually any carbon tax would apply pressure to transition away from oil and toward domestically generated clean energy.
Perhaps a well-constructed carbon tax’s propensity to grow the U.S. economy in the long term while benefiting the majority of consumers even in the short run and shifting American energy usage homeward is why prominent conservatives such as former Secretaries of State George Shultz (under Reagan) and James Baker (under George H. W. Bush) advocate for this climate solution. Coming down against a carbon tax would be a move that would come at great opportunity cost for the House of Representatives. Instead, interested members from both parties should come together and look into proposing one. So call your Colorado representative and urge him or her to do as much.
Daniel Palken is a PhD student in experimental physics at CU Boulder