A new study has found that carbon taxes will not hinder the economy, according to The Guardian. The Stanford Energy Modeling Forum (EMF) project included eleven modeling teams, each examining the impact of “revenue recycling” carbon taxes in which revenue is returned to taxpayers through either rebate checks or the offsetting of income taxes, as in British Columbia.
The eleven teams came to the same conclusion – that carbon taxes have the potential to reduce carbon pollution, depending in part on the structure of the tax. They also found that this type of “revenue recycling” carbon tax would have only a modest impact on gross domestic product (GDP). And crucially, this modest impact would itself be compensated for by mitigation of the economic impact of pollution and climate change.
Yet, Republicans in Congress are currently preparing to pass a resolution declaring that carbon taxes are “detrimental to American families and businesses, and is not in the best interest of the United States.”
The teams looked at four scenarios, including per ton taxes for carbon starting at either $25 or $50, and rising at either 1% or 5% annually, generally more conservative policies than existing proposals from climate advocacy groups, which start as high as $40 per ton, in the case of the Climate Leadership Council proposal. All four models showed minimal impact on the economy, even without factoring in the mitigation of economic risks associated with climate change itself.
The authors wrote:
“In every policy scenario, in every model, the U.S. economy continues to grow at or near its long-term average baseline rate, deviating from reference growth by no more than about 0.1% points. We find robust evidence that even the most ambitious carbon tax is consistent with long-term positive economic growth, near baseline rates, not even counting the growth benefits of a less-disrupted climate or lower ambient air pollution.”
The biggest losers in a carbon tax, according to the analysis, would be coal power plants, which are responsible for public health issues linked to the release of soot and mercury, which themselves carry significant economic costs that would be reduced by phasing out coal.
And the benefits of mitigating climate change have been even more thoroughly documented. One recent working paper by the Federal Reserve Bank of Richmond found that meeting Paris agreement targets would avoid a 0.2 to 0.5 percent slowing of economic growth associated with projections based on current emissions levels. That amount exceeds the hindrance associated with any of the carbon tax scenarios.