Report: A Carbon Tax That Would Create Jobs, Cut Emissions and Put Money in Your Pocket

Giving taxpayers $250 per month, reducing carbon emissions and boosting the economy. This is what the future could hold if the United States imposed a revenue-neutral carbon tax on fossil fuel production.

What if I told you that, once a month, a check for, say, $250 is going to show up in your mailbox, just because you and your family are taxpayers?

Now, what if I told you that this extra beer money – or cash for a fancy sushi date, whatever – is coming out of the pockets of some of the nation’s biggest polluters and contributors to climate change? And that the tax scheme behind this monthly check will not only reduce climate-changing carbon emissions, but it will also boost the economy and expand the use of renewable energy sources as well?

I know you’re thinking that this sounds too good to be true. Well, of course it is. But this is what the future could be like if the United States imposed a revenue-neutral carbon tax on fossil fuel production, a proposal that has found support on both the left and the right.

A Carbon Tax Grows the Economy

In a study released Monday, researchers at the non-partisan economic consulting firm Regional Economic Models Inc. (REMI) found that recycling the carbon tax revenues back into society over 10 years would create 2.1 million extra jobs nationwide. Carbon emission would drop by 33 percent in the first 10 years and 52 percent in 20 years, and improvements in air quality would save 227,000 lives over the course of 20 years. The US gross domestic product would also see a significant boost after 2020, and would grow by a cumulative $1.4 trillion over 20 years.

A carbon tax would also impact the energy market. REMI projected that most coal burning power plants, which account for about 40 percent of carbon emissions in the United States, would eventually be phased out and shut down under the tax. Nuclear facilities, natural gas production and the use of so-called “carbon sequestration” technology that traps carbon emissions from fossil fuels would all expand under the tax. The use of wind power would also expand dramatically.

“Wind will be a big winner, and so will air quality,” said Scott Nystrom, a senior economic research associate at REMI.

And then there’s your monthly check. By 2025, the average family of four with two adults would get a check for $288 every month. By 2035, a family of four could expect nearly $400.

Job Winners and Losers

There are winners and losers in economics, and REMI’s carbon tax models do not show positive results for everyone. Average consumers would not need to worry too much; electricity and cost-of-living prices would initially see small increases during the first 10 years of the tax, but the added income from the tax revenues would more than make up for these increases. A steep revenue-neutral carbon tax, however, could send coal miners looking for new jobs as the tax pushes the energy market away from fossil fuels. Oil, gas and coal producers and the petrochemical and other manufacturers closely connected to them would take considerable economic hits and cut thousands of jobs over the years.

By 2020, there would be 25,000 fewer jobs in oil and gas drilling, according to REMI. However, fields like health care, education, construction, food service and retail service would see bigger outputs and hire more people, as consumers spend the extra money from the tax revenues. Jobs may also be added in renewable energy sectors. In fact, the REMI study shows that many more jobs would be created than lost under a carbon tax system.

“Detractors have said that a carbon tax will kill jobs,” said Mark Reynolds, executive director of the Citizens Climate Lobby, a non-partisan group that commissioned the study and supports a carbon tax. “The REMI study turns that assumption on its head.”

In fact, every region of the United States would see an increase in employment under the tax except the Western, South-Central region, where Gulf of Mexico states like Texas, Louisiana and Mississippi host major fossil fuel production and distribution hubs. Nystrom said that this region would experience job loss under the tax system, but the tax would only make a small dent in the region’s gross economic production.

So how high will this tax be? REMI’s tax model would start at $10 per metric ton of carbon dioxide content in fossil fuels at the point of extraction, and then increase by $10 per metric ton every year after that. One metric ton of carbon dioxide would fill a cube nearly 27 feet high, about the same size as an average home.

Oil and gas would still be in high demand under this tax, but it would slowly become harder for coal to compete, and the use of renewables like wind would be much more common, according to models in the report.

Industry Opposition

For obvious reasons, the oil, coal and gas industries and their powerful lobbies are already opposed to a carbon tax and would fight tooth and nail to keep any of the REMI models from becoming a reality. Job loss is probably the most painful prospect of moving away from dirty energy, and jobs are at the heart of the fossil fuel industry’s rallying cry every time the Obama administration or anyone else attempts to set regulations to curb pollution and climate change.

Coal, the nation’s dirtiest fossil fuel, has seemed especially desperate in its effort to stay relevant, as federal regulators consider new limits on carbon emissions from power plants, and the ongoing fracking boom continues to make natural gas a cheap and cleaner-burning alternative.

Since last week, when the Environmental Protection Agency (EPA) announced the Obama administration’s proposed plan to reduce carbon emissions from existing power plants by 30 percent over the next 15 years, the coal industry and its allies in Congress have fulfilled all expectations and gone on an all-out offensive.

Senate Minority Leader Mitch McConnell of the traditional coal-heavy state of Kentucky called the announcement “a dagger in the heart of the middle class, and to representative democracy itself.” Coal industry groups, pro-coal politicians and the US Chamber of Commerce went on record over and over, stating the proposed rules would kill jobs, hurt the economy and raise utility bills for average Americans.

Unfortunately for the coal industry, as we’ve reported here at Truthout, climate change is a reality that can no longer be ignored. Reynolds, whose organization works to help citizens directly lobby their representatives on climate issues, wrote in a recent editorial that critics of the EPA’s plan must come up with a better idea or “hold their tongue.”

“In other words, it’s time to put up or shut up on global warming solutions,” Reynolds wrote in The Huffington Post.

“If Republicans don’t want more EPA regulations, their best recourse is to deliver a revenue-neutral carbon tax, which is supported by conservatives from George Shultz to Greg Mankiw,” Reynolds said in a statement. “With the REMI study showing a carbon tax that returns revenue to households will add millions of jobs, this is the option everyone can embrace.”

A carbon tax does sound like a plan that everyone – except the fossil fuel industry – can embrace, but with the coal industry and the Obama administration poised to battle over historic emission limits for power plants, it’s unlikely a serious carbon tax proposal will be on the table any time soon. Still, groups like the Citizens Climate Lobby believe that a tax on carbon could garner support from voters across the political spectrum.

If REMI’s calculations are correct, a carbon tax seems to make clear economic sense: It would force the market toward embracing alternatives to fossil fuels while creating jobs and improving the environment. But it would also do something else that Reynolds and Nystrom failed to elaborate on – force the fossil fuel industry to give back to the public. We all must breath the air and live in a world with a changing climate due to fossil fuel consumption, but most of us never share in the industry’s profits, even as our public lands and waters are leased to private oil and gas companies for drilling and exploration. The most we can hope for is a reasonable utility bill and a cheap tank of gas every so often. If we’re going to let these industries ravage the earth in the name of cheap energy, then we might as well get a cut.