Opinion: Taxing carbon — Are the benefits worth the cost

by Jeff Pollock, J.Pollock Inc.

An enormous balancing act is rapidly unfolding in our nation, with the very real possibility of bankrupting us all. An immediate and active debate must develop about proposals to tax carbon, in recognition of the costs involved, recent findings that significant reductions in carbon emissions will not dramatically impact global temperatures, and renewed concerns that the science of global warming has yet to be settled.

The Obama administration has proposed a federal budget that includes nearly $650,000,000,000 in new “climate-related” revenues through 2019. These revenues would be collected as taxes, primarily from energy producers, manufacturers, and other industries that emit carbon dioxide. J.Pollock Inc., an energy consultancy, has determined that the proposal would result in nearly $577,318,000,000 of additional costs on the electric industry alone. The huge impact of such a tax most certainly guarantees much higher electricity costs for all consumers.

Not surprisingly, the census regions with the least amount of coal-fired generation (New England and Pacific) would be the least affected by the proposed carbon taxes. Translating the projected regional carbon taxes into consumer impacts, we estimate that, by 2023, every consumer will be paying significantly higher electricity costs.

Environmentally conscious consumers might be willing to pay $50 to $300 more on their bills to combat what they perceive to be a serious problem. However, carbon taxes will dramatically increase electricity costs paid by the many businesses and manufacturers, which are the “engine” of our economy, by providing jobs, creating disposable income, and generating tax revenues to fund local, state, and federal governments.

According to the National Association of Manufacturers, about one-third of the energy consumed in the United States, including 40 percent of the natural gas and 30 percent of the electricity, is consumed by manufacturers. Electricity is also a significant operating cost in the manufacture of a wide range of consumer and durable goods made from metals, plastics, and/or chemicals. Economic reality dictates that these businesses will be forced to pass the higher costs on to consumers, cease domestic operations, or relocate to nations that choose not to levy a carbon tax. Ultimately, American citizens could suffer due to higher costs for goods and services and higher unemployment.

The question we should be asking as citizens and as a nation is whether the anticipated benefits derived from the proposed carbon taxes (i.e., lower greenhouse gas emissions) are likely to outweigh the huge costs. On this important question, the carbon tax proponents have been curiously silent.

With very little effort, we found many articles and statements by numerous researchers and scientists with dissenting opinions about manmade global warming concerns. The dissenters include scientists from a wide range of disciplines from all over the globe. One recent study revealed no significant change in global temperatures as a result of reducing carbon emissions. While common thinking is to adopt prevailing views as truth, this is the exact juncture to become educated about opposing opinions. History demonstrates that, once established, it is highly unlikely that a carbon tax (like the personal income tax) would ever be repealed. Hence, the time for questioning is now.

We believe that the costs of the Obama administration’s climate policies on the electric industry and its consumers are many, while the benefits are questionable at best. The stakes are too high to dismiss the growing chorus of skepticism within the science community. Our political leaders and the public must insist upon a continued open and vigorous public debate about these global issues in order to identify the most effective and efficient strategies and to address unintended consequences. Otherwise, the Obama administration will be guilty of using the same tactics it accuses the Bush Administration of: elevating politics over science.

Jeff Pollock has been an energy advisor since 1975. He has a bachelor of science degree in electrical engineering and a masters in business administration from Washington University. He worked at Drazen-Brubaker & Associates Inc. (DBA) and as a managing principal for Brubaker & Associates Inc. (BAI) before founding J.Pollock Inc.

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