By Institute for Energy Research ——Bio and Archives--January 11, 2013
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In 2012, the U.S. Energy Information Administration (EIA) made a comparison analysis for a carbon tax that starts at $25 and rises by 5 percent per year (after adjusting for inflation).Compared to the baseline case, without the carbon tax, this would:What should be even more disturbing to the progressive supporters of a carbon tax, is that it would have a disproportionate impact on low-income households, particularly those with long driving commutes. This is because the spike in electricity and gasoline prices would hurt their household budgets more than they would hurt those of "the 1%."
- Cut the income of a family of four by $1,900 per year in 2016 and lead to average losses of $1,400 per year through 2035;
- Raise the family-of-four energy bill by more than $500 per year (not counting the cost of gasoline);
- Cause gasoline prices to increase by up to $0.50 gallon, or by 10 percent on an average gallon price; and
- Lead to an aggregate loss of more than 1 million jobs by 2016 alone.
Unilaterally reducing greenhouse gases would not make a dent on global emissions and, consequently, would do next to nothing to reduce global temperatures. Even if the U.S. were to curb carbon emissions 83 percent below 2005 levels by 2050 (what cap-and-trade bills required), it would reduce global temperatures by only a few tenths of a degree Celsius by the close of the century. This is because future carbon emissions will come overwhelmingly from the developing world (China and India, for example), which shows little appetite for squeezing economic growth for the sake of the environment.This is the Achilles heel of a carbon tax, even if we stipulate the most alarmist figures about potential future damages. On its own terms, (manmade) global warming is a global problem, and thus unilateral action by the United States government will do little to solve the problem, even if it is as dire as some of the loudest voices warn us. Significantly, when presented with the above types of arguments, now a standard reply from the advocates of a carbon tax is to argue that unilateral US action (or action by the US and Europe) will spur the development of very cheap, non-fossil-fuel alternatives, which China, India, and African countries will adopt because of the financial savings. This is the equivalent of a Hail Mary pass that the government itself admits will eventually cost American households more than one thousand dollars per year. Maybe we should come up with a new game plan? The argument is even more strained when we think it through in terms of the situation with and without US participation in a carbon-tax regime. Currently, gasoline taxes and other regulations cause gasoline prices to be much higher in the rest of the world than in the United States, as a report last year documented:
In the U.S.,gas prices average$4.19 per gallon, according to Bloomberg. In contrast, gas prices are $5.75 per gallon in Canada, $6.75 per gallon in Australia, $8.84 per gallon in the United Kingdom, and $9.35 per gallon in Italy.These facts are often used by progressives to argue that the US is "undertaxed," but they can also show that the cheap "green" technologies haven't yet sprung into existence, despite many other people around the globe facing much higher gasoline prices.
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.