NCPA - National Center for Policy Analysis

California's New Green Tax

November 2, 2011

The state of California has become the first jurisdiction in the United States to adopt a full-scale cap-and-trade system for its carbon emissions.  The institution of the new tax comes at a time when many members of similar (though not identical) pacts are slowly jumping ship, as can be seen in the gradual deterioration of the 10-state agreement in the American northeast.  Furthermore, an EU commission report recently concluded that even efforts by an entire continent are insignificant in the movement to slow global warming, begging the question of what a single state can hope to accomplish on its own.  The report also pointed out that while green policies such as a cap-and-trade tax help to address climate change, they have a palpably negative impact on the ability of local firms to compete, which is an extremely relevant fact for California, which has the second-highest rate of unemployment in the United States, says the Wall Street Journal.

  • The new tax will call for a 30 percent reduction in carbon emissions from power plants, manufacturers, cars and trucks by 2020.
  • A 2009 study by the California Small Business Roundtable concluded that the costs of the new tax could total $3,857 per household by the end of 2020.
  • The state of California is already facing 11.9 percent unemployment with 2.1 million people out of work.
  • The Western State Petroleum Administration estimates that the new law could cost its members up to $540 million in higher costs in the first two years alone.

The tax, which was signed into law in 2006, outlived the turn against cap-and-trade that took place in the national arena when U.S. Senate Democrats killed a similar tax in 2010 that would have been implemented nationwide.  Nevertheless, critics of the new tax formed a substantial opposition bloc that included substantial support from unions that operate within the state.  Recognizing the potential for new taxes to increase the rush of jobs out of the state, union workers protested the tax to the California Air Resources Board, but to no avail -- the tax will still be implemented.

Source: "California's New Green Tax," Wall Street Journal, November 1, 2011.

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