Last month a group of noted conservatives, gathered into the Climate Leadership Council (CLC), outlined yet another carbon tax proposal. This week the American Enterprise Institute (AEI) offered a harsh critique of their plan in its new report, “The Deeply Flawed Conservative Case for a Carbon Tax.”
Backing up its position that “Virtually all of the CLC assertions in support of its proposal are incorrect or implausible,” the AEI report breaks down each of the CLC’s claims and refutes them in extensive–and well-footnoted—detail.
It starts by questioning the premise that drove the CLC to promote the carbon tax, noting that “The CLC provides no evidence that climate risks are ‘too big’ and assumes that the proposed tax would provide ‘insurance’ without examining the future climate effects of its proposal.”
The report then dismantles several of the conservative values that the CLC had tried to use to bolster a “conservative” case for a carbon tax. They include:
Claim: Their carbon tax proposal would result in smaller government
AEI: “Contrary to its assertions, the CLC proposal would increase the government allocation of resources and thus the size of government.”
Claim: CLC’s proposal would result in a stronger economy
AEI: “And the premise that the proposal will strengthen the economy by engendering new investment in unconventional energy is a classic manifestation of the broken-windows fallacy: Because the proposal would increase energy costs with no environmental benefits, the economy in the aggregate would be smaller.”
Claim: CLC’s carbon tax “dividends” would help lower-income Americans
AEI: “The CLC misrepresents the findings of a Treasury Department study; after accounting for employment and wage effects, the bottom 70 percent of the income distribution are unlikely to find themselves better off.”
AEI’s conclusions back up those others have made regarding carbon taxes. As a recent op-ed by H. Sterling Burnett, the managing editor of Environment and Climate News, noted:
Multiple independent analyses, including reports by the Congressional Budget Office (CBO) and National Association of Manufacturers (NAM), have found carbon taxes and similar policies result in significant negative unintended consequences. …
And those negative consequences are of alarming proportions:
NAM says a carbon tax could eliminate the equivalent of 21 million jobs over the next 40 years and reduce workers’ wages by up to 8.5 percent. NAM also says a carbon tax would increase the cost of goods and services, as manufacturers and retailers would pass their higher energy costs on to consumers. …
CBO notes a carbon tax is highly regressive, costing the poorest one-fifth of American households 250 percent more than the richest one-fifth of households.
As the report wryly notes, “Poor analysis is pervasive in Beltway policy debates.” It’s worth taking a read of this report to get a sense of the many pitfalls that underlie carbon tax proposals.