For part one of this discussion, click here.
There are two major reasons not to adopt a carbon tax (CT). First, the tax will impose an expense on major industries and utilities. When business expenses increase the cost of products increase and so it is the consumers of those products who will pay the cost. Those businesses which cannot pass their expenses onto the consumer will cut back possibly leading to loss of jobs. Ultimately, then, the majority of hard-working, lower to middle income citizens will be most harmed. The carbon tax is a regressive tax. Low incomes pay more, upper incomes pay less. Second, given the fact that American consumers will pay more, what will they get in return? The evidence for those nations which have implemented a carbon tax is mixed. In some cases, the overall volume of carbon emissions has decreased. Perhaps people are walking more because they can't afford to drive. In other cases, the drop in emissions has been modest to nothing, mainly due to the fact that loop-holes and exemptions will mean some industries will continue to emit GHGs at pre-tax levels. But even if the U.S. implementation does succeed in lowering U.S. emissions, it is unlikely to reduce the rate of global of warming and it is nearly certain it will not reverse. Other large, developing nations such as China, India and Brazil churn out millions of tons of GHGs into an already saturated ecosystem. Now while, that may seem like a tough position to take considering that SOMETHING must be done if climate studies are to be believed, then why not accept the Pro position that a federally mandated carbon tax can be revenue-neutral by lowering other taxes and still take a step in the right direction in lowering overall emission rates? Revenue-neutrality is very much a point of contention, so rather than lay the cost on American tax payers, we should look at alternative solutions. To that end, there is another non-topical solution which we may also consider. Currently, there are at least four states considering their own carbon tax; Massachusetts, Vermont, Washington and Oregon. This solution may have better appeal because, the revenues generated remain local to the taxpayer and can be used for things which more directly benefit the taxpayers. Additionally the politicians and agencies which control the administration of the tax are presumably more accessible to the residents of the state as opposed to the bureaucrats in Washington D.C.
Harms and Disadvantages
The carbon tax is a regressive tax which disproportionally burdens the lower income Americans. This is confirmed by the Congressional Budget Office.
The higher prices resulting from a carbon tax would tend to be regressive—that is, they would impose a larger burden (relative to income) on low-income households than on high-income households. The reason is that low income households spend a larger share of their income on goods and services whose prices would increase the most, such as electricity and transportation. For example, an earlier CBO analysis concluded that a policy that set a price of $28 per metric ton on CO2 emissions would increase costs for households by amounts that would equal about 2.5 percent of after-tax income for the average household in the lowest one-fifth (quintile) of the income distribution but less than 1 percent of after-tax income for the average household in the highest quintile.15 Other analysts reached similar conclusions using a different method for allocating the cost of a carbon tax among households.16 They estimated that the burden imposed by a tax of $20 per ton on CO2 emissions would amount to 1.8 percent of before-tax income for households in the lowest quintile and about 0.7 percent of before-tax income for households in the highest quintile. A carbon tax would still be regressive, although less so, if the cost of the tax was measured relative to households’ lifetime income rather than their annual income. [8-9]
Further, according to the CBO, a carbon tax would disproportionally harm key business sectors, and have negative impacts.
Workers and investors in fossil-fuel industries (such as coal mining and oil extraction) and in energy-intensive industries (such as chemicals, metals, and transportation) would tend to experience comparatively large losses in income under a carbon tax because demand for their products would decline.
History shows that when government imposes high cost on American industries, corporations will seek relief by shifting their operations to offshore locations where the regulatory burdens are less. In fact this is a major disadvantage to the fact that not every nation has jumped on to the "save the planet" bandwagon. We have learned from past debate topics that nations struggling to maintain a basic economy have little motivation to be curtail activities which "save the planet".
Domestic carbon taxes will force more industries to leave America. Energy costs are a major expenditure for heavy industry. America’s natural gas prices are the highest in the world, even though we have the world’s sixth largest proven natural gas reserves. The high price of natural gas has significantly contributed to the loss of more than three million manufacturing jobs since 2000. Carbon taxes will drive up the cost of natural gas because companies would use it as a substitute for coal in electricity production, which means increased electricity costs for industry and increased natural gas prices. This is especially troublesome for chemical companies, all of which use natural gas not only as an energy source, but also as a feedstock. Higher natural gas prices will force them to pursue options offshore and overseas, reducing American jobs.
While the CBO notes that eventually these job-losses will be offset over time, there is no estimate how long people will be unemployed. Worse yet, the loss of jobs will be greater in regions of the country where the target industries are concentrated.
The effects of a carbon tax would vary by region as well. Parts of the country that rely on fossil fuels or energy intensive production for income would experience larger losses than other regions. Likewise, households in places where electricity is generated from coal would probably see larger increases in electricity prices than their counterparts in other regions. For example, analysts have estimated that a tax of about $21 per metric ton on CO2 emissions would raise the price of electricity by an average of 16 percent for the United States as a whole, but that increase would vary widely in different parts of the country. Households in Illinois, Indiana, Kentucky, Michigan, Missouri, Ohio, West Virginia, and Wisconsin would see the biggest rise in electricity prices (27 percent), and households in California would see the smallest rise (7 percent).
The Cato Institute's Murphy, et al. have written an essential report every Con debater should have in their files. They cite many misconceptions and inaccuracies which discredit some of the strongest arguments of CT proponents. For example, often the experience of British Columbia as an example of carbon tax done right is touted. But Murphy, et al. deflate the claims.
Murphy, Michaels & Knappenberger 2015:
When moving from academic theory to historical experience, we see that carbon taxes have not lived up to the promises of their supporters. In Australia, the carbon tax was quickly removed after the public recoiled against electricity price hikes and a faltering economy. Even in British Columbia — touted as the world’s finest example of a carbon tax — the experience has been underwhelming. After an initial (but temporary) drop, the B.C. carbon tax has not yielded significant reductions in gasoline purchases, and it has arguably reduced the B.C. economy’s performance relative to the rest of Canada.
So if a CT creates disadvantages for everyday Americans by negatively effecting the nations economy, then where is the Pro case? Certainly taxes produce revenue streams for governments and it is governments which decide how to use the money. But let's not lose sight of the fact, the real reason for imposing this hardship on people is to do something to mitigate global warming.
CT Does Not Solve
If we accept the reduction of GHG emissions as the core objective then we must ask ourselves why is that an objective and is a CT the best way to achieve the objective. The why is based on the claims of climate scientists that GHG emissions are one of the main reasons for global warming and its related harms. Therefore a proposed CT must lower emissions. One thing is certain. People still need energy and unless a CT somehow drives innovation in the development of alternative energy sources, people will burn coal, trees, rubber or what ever else they can to get the energy they need and these are all carbon sources.
But empirical evidence demonstrates that the price signal generated by the kinds of carbon taxes under consideration will not lead to technological breakthroughs. That evidence comes from Europe, a comparably sized market to ours, where taxes and related policies have already pushed energy costs far above the levels that a carbon tax would take them in the United States. For instance, $1 of tax on a ton of CO2 emissions adds approximately one cent to the cost of a gallon of gas. With gas prices typically at least $4 higher than U.S. prices, Europe already has the equivalent of a carbon tax on the order of $400 per ton of CO2. Similarly, taxes and fees drive Europe's electricity costs up to more than double U.S. rates, the equivalent of a carbon tax of more than $200 per ton. To the extent that large price signals will produce innovation, the United States could presumably free-ride on the incentives offered and paid for by the European market. But such innovation has not been forthcoming, and it is unclear why more of the same signals in the American market would change the dynamic.
So if a CT fails to spark the technological revolution, then what about lowering emissions? As I have pointed out in my analysis, the carbon tax does not impose limits (caps) on emission rates. It assumes the cost of emitting will drive emission rates down. However, a report by the Congressional Budget Office, states there is a better way to guarantee lower emissions.
...although this report focuses on a carbon tax, lawmakers could implement other policies that would both raise revenues and set a price on CO2—such as a cap-and-trade program in which the government sold emission allowances rather than giving them to firms at no cost. A cap-and-trade program could provide more certainty about the overall amount of CO2 emissions, which would be set by the cap, but it would provide less certainty about the price of emissions, which would depend on the cost of meeting the chosen cap.
So we see that while a CT provides a cost certainty (it is fixed by the imposed tax rate), cap-and-trade provides a revenue stream but more importantly, guarantees a reduction in emissions.
The United States currently accounts for about 18 percent of global CO2 emissions; that share is projected to decline to about 15 percent by 2035 as emissions in other countries rise. Acting on its own, the United States could have only a modest effect on the amount of warming. In particular, efforts to limit global warming are likely to require significant reductions in emissions by rapidly growing economies, such as those of China and India.
The big picture, then, is not pretty without full international cooperation. The Con position agrees something must done, and indeed, the U.S. is already implementing regulatory measures to limit emissions. We just need a better solution than the federal government imposing a regressive tax on American consumers.
This position offers an approach for disputing Pro claims advocating a carbon tax and provides a fundamental launching point for further research. Look at how the Pro advocacy results in harms and disadvantages. In this case, I have focused on the impact on American labor and the export of jobs to countries with fewer operations expenses. Then, I show that a carbon tax may not succeed in lowering emissions and even if the judge does not buy that, there is a lot of suffering to endure for no real benefit when examined in a global context. And finally I suggest that state initiatives or cap-and-trade, while perhaps no less painful to consumers, may be more acceptable to Americans or provide a much more certain method for reducing emissions.
Cass O (2015), The carbon tax shell game, National Affairs, Issue 24 Summer 2015. Accessed 1/21/2016.
CBO (2013) Effects of a carbon tax on the economy and the environment, Conggressional Budget Office, May 2013. Accessed 1/21/2016.
IER (2009), Carbon Taxes: Reducing Economic Growth—Achieving No Environmental Improvement, Institute for Energu Research, Mar. 2009, accessed 1/21/2016
Murphy RP, Michaels PJ, Knappenberger PC (2015), The case against a carbon tax, The Cato Institute, Working paper 33. accessed 1/21/2016.