NCPA - National Center for Policy Analysis

The Case Against a Carbon Tax

September 18, 2015

Policymakers and environmentalists have proposed in recent years that a federal carbon tax is a necessary response to curb climate change. However, the economics of such a climate change plan would be ineffective or even harmful to the United States.

The "social cost of carbon," or the present value of future damages caused by carbon dioxide emissions, is the basis for arguments in favor of a U.S. carbon tax. However, the models used to measure the social costs in recent years have profoundly failed, making them unreliable in their forecast utility. In a recent U.N. Intergovernmental Panel on Climate Change (IPCC) report it was noted that aggressive emission cutbacks could cause more damage than help. Carbon taxes cause more economic damage, suggesting that swapping out a generic tax on labor or capital would probably reduce conventional GDP growth.

  • The carbon tax in Australia was repealed quickly after the resulting price hikes in electricity causing the economy to falter.
  • Compared to the other provinces, British Columbia's economic performance is lower suggesting that its carbon tax and subsequent drop in gasoline purchases is a fault.

Evidence is continuing to grow that human carbon dioxide emissions do not actually cause as much global warming as currently asserted by official models. Both in theory and practice, a U.S. carbon tax is a dubious policy proposal.

Source: Robert P. Murphy, Patrick J. Michaels, and Paul C. Knappenberger, "The Case Against a Carbon Tax," Cato Institute, September 4, 2015.

 

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