Written by Nicolas Loris
Instead of rallying together to fight the Obama Administration’s backdoor environmental regulations, which have exorbitant costs and minimal benefit, some conservative organizations are working with liberal groups to push costs higher by piling on a carbon tax. This would be nothing more than an enormously high, regressive energy tax that would needlessly destroy jobs and economic growth.
The abundance of shale gas and the potential for stably low natural gas prices have energy-intensive industries champing at the bit to come to the United States. The combination of onerous, duplicative regulations and a carbon tax would reverse that immediately. And all for no noticeable change in the earth’s temperature.
Since an overwhelming majority of our energy needs are met by fossil fuels, these rules directly raise the cost of electricity, gasoline, diesel fuel, and home heating oil. Since low-income families spend more of their budgets on energy, a tax that increases energy prices would disproportionately eat into the income of the poorest American families.
As Congress of Racial Equality chairman Roy Innis says, “The civil rights challenge of our time is to stop extreme environmental policies that drive up the cost of energy and disproportionately hurt low income Americans and the working poor.” The higher energy costs of a carbon tax would dwarf any type of rebate low-income families would allegedly receive.
But the pain doesn’t stop there. Businesses, faced with higher energy costs, would pass those costs on to consumers. However, if a company has to absorb the costs, high energy costs squeeze profit margins and prevent businesses from investing and expanding.
The energy-intensive manufacturing industry would be hit particularly hard. Economists in The Heritage Foundation’s Center for Data Analysis estimate that manufacturing jobs would have fallen dramatically under a cap-and-trade scheme. A carbon tax would do the same. Some companies would disappear completely. Others would go overseas to countries that choose not to implement a carbon-reduction scheme, where the cost of production would be much cheaper.
Further, a carbon tax would do almost nothing to impact global temperatures. The developing world is still very much in development. Carbon dioxide emissions from China and India are rapidly increasing as they continue to expand their economies, and they have no intention of scaling back economic growth to curb emissions.
Even if the U.S. were to curb carbon emissions 83 percent below 2005 levels by 2050 (what cap-and-trade bills called for), it would constitute a very, very small portion of emissions worldwide and reduce global temperatures by a few tenths of a degree Celsius by the close of the century.
A carbon tax is not a conservative, free-market policy, and the thought that it could make it through the halls of Congress and through lobbytown to be revenue neutral is laughable. Conservatives should be working to fight the egregious regulations that drive up energy costs—not piling on policies that will drive them up further.
Nicolas (Nick) Loris, an economist, focuses on energy, environmental and regulatory issues as the Herbert and Joyce Morgan fellow at The Heritage Foundation.
In Heritage's Roe Institute for Economic Policy Studies, Loris researches and writes about energy prices and other economic effects of environmental policies and regulations, including climate change and "cap and trade" legislation. He also articulates the benefits of free market environmentalism.