The Congressional Budget Office Says We Need A Price On Carbon Emissions

The Congressional Budget Office (CBO) thinks putting off efforts to reduce carbon dioxide emissions risks “catastrophic” losses for the United States’ economy and society. That’s according to a new report on the economic and environmental effects of a carbon tax CBO published Wednesday.

The CBO is the group of analysts tasked with modeling and projecting the consequences of Congress’ proposed laws, so that lawmakers can have some idea of what the likely consequences of their actions will be. You may recall the CBO from the big role its scores played in the debate over health care reform a few years ago. They’re a highly respected, methodologically cautious, and strictly nonpartisan outfit that’s widely viewed as the go-to authority for refereeing policy disputes in Washington.

With China on the verge of unilaterally putting a cap on its own carbon emissions, and with wide support for a carbon tax amongst voters, politicians, industry, economists and think tanks, the fact that CBO is using its position to highlight the risks of not addressing climate change is worth paying attention to.

Now, much of their report’s content wasn’t new. It projected that a price of $20 per metric ton on carbon dioxide emissions would bring in $1.2 trillion in revenues between 2012 and 2021, and cut emissions by roughly 8 percent over the same period, which came from work CBO did in 2011 (page 205). And the debate over what to do with the revenues from a carbon tax, which much of the report is dedicated to, is also familiar.

But one thing that is noteworthy is CBO’s blunt assessment that allowing climate change to continue unchecked could be very costly to both the United States and global society:

Climate change resulting from an increase in average temperatures is a long-term problem with global causes and consequences, including effects on humans and ecosystems. Significantly limiting the extent of future warming would require a concerted effort by countries that are major emitters of greenhouse gases. Nonetheless, U.S. efforts to decrease emissions would produce incremental benefits, in the form of incremental reductions in the expected damage from climate change.

Researchers have attempted to estimate the monetary value of the future damage from climate change associated with an increase in CO2 emissions in a given year — and thus the value of the benefits from a commensurate reduction in emissions — a measure referred to as the social cost of carbon (SCC)… Those values are highest when researchers attach significant weight to long-term outcomes and when they incorporate a small probability that damage from climate change could increase sharply in the future — causing very large, or even catastrophic, losses. Delaying efforts to reduce emissions increases the risk of such losses. Given the inherent uncertainty of predicting the effects of climate change, and the possibility that it could trigger catastrophic effects, lawmakers might view a carbon tax as a reflection of society’s willingness to pay to reduce the risk of potentially very expensive damage in the future.

Even CBO’s 2009 round-up of climate change science, which focused heavily on the uncertainty built into such projections, pointed out that the worst case scenarios for climate change “even if unlikely, would justify more stringent policies than would result from simply balancing the costs of reducing emissions against the benefits of averting damages from the expected or most likely degree of warming.”

As for the question of how to structure a carbon tax, the Center for American Progress’ Richard Caperton put forward a proposal last December for a tax of $25 per ton on carbon dioxide emissions from power plants. That ought to put us on a course to reduce those emissions by 17 percent from 2005 levels by 2020, and 80 percent by 2050, though the tax would ultimately need to be expanded to the entire economy. Caperton estimated the revenue from this tax — more limited than the one envisioned by CBO — would be in the vicinity of $55 billion annually. That could be split between the roughly $20 billion annually needed to fund research and development of clean energy, deficit reduction, and support for low-income Americans.

That last aspect is especially important, because on its own a price on carbon has a regressive effect, imposing more costs on the poor and the working class than the well-off. Reductions in the payroll tax, or refundable income tax rebates, would do the most good, mainly because they target support to the very people who would most need help shouldering higher energy costs. But CBO’s new report also found that a price on carbon would reduce overall growth slightly by reducing incomes throughout the economy, and by working through income taxes those two options would counteract that drag.

25 Responses to The Congressional Budget Office Says We Need A Price On Carbon Emissions

  1. M Tucker says:

    “with wide support for a carbon tax amongst…politicians…” Seriously? Wide support among politicians…have you heard the Republican howls whenever a new tax or increasing the tax on the wealthy is mentioned?

    OK Senator Coburn wanted to oppose financial aid for the Moore tornado victims unless some other spending could be cut. That seems to be the Republican position for any increase in spending or tax. New increase is always tied to a new cut.

    Well OK, if the CBO thinks there is wide support just run it up the flag pole and see if anyone salutes. But tax or revenue generating bills need to originate in the House so maybe we should ask the old Boner how that will fly with his caucus.

  2. prokaryotes says:

    Tax fossil fuels and give that money back to the households and let the free market decide – James Hansen

    Explained here min 39:00

  3. Mike Roddy says:

    A carbon tax is the key fight, and so far the side of sanity has been getting its butt kicked. There is no indication that Republicans will wake up, since when there is a waverer in Congress Koch and friends finance a primary challenge, and don’t mind if he ends up getting replaced by a Democrat. They want to enforce Party “discipline”, since their “message” has been whatever the oil companies want.

    More troubling is the Democrats’ refusal to call them on it. They are missing a big opportunity here. It may upset Blue Dogs like Landrieu and Manchin, but who cares? They vote Republican when fossil fuels are at stake anyway.

  4. prokaryotes says:

    “..the Democrats’ refusal to call them on it. They are missing a big opportunity”


  5. Wes says:

    Mike, just look at the “journalism” that directs the progressive attention and it is easy to see why Democrats act this way. What priority does Glen Greenwald, or Rachel Maddow, or progressive “consciences” like Chomsky give to climate change, climate risk, etc.? The answer is asymptotic to zero. They seem to care more about Bradley Manning that the population of any climate threatened country.

    Anyone watch Nova last night? Spent an entire program on tornadoes, a lot of it on Moore, OK and the May 3 event of 1999 (not the one from this week) and none of it mentioned climate. Of course, it was funded by the David H. Koch Fund for Science.

  6. Merrelyn Emery says:

    When one considers that every prediction of effects has been overwhelmed by reality, the uncertainty associated with ‘worst case’ scenarios suddenly dwindles into insignificance, ME

  7. prokaryotes says:

    Noam Chomsky: Peak Oil and a Changing Climate

    Chomsky at least is on page 1…

  8. Wake up! There is a HUGE difference between taxing emissions and taxing carbon.

    Taxing carbon at the well and coal mine is far more effective, and equitable.

    Taxing emissions only restricts domestic use. Means that coal and oil will still be burned.

  9. BillD says:

    I think that it’s only practical to tax emissions. However, when the price of gasoline goes up, for example, this creates stronger incentives for alternative energy and for increased efficiency. If you tax at the mine or well, how as that really different than taxing gas at the station or taxing the power plant?

  10. Leif says:

    Taxing at the source taxes the producer. Taxing emissions taxes the consumer. Stop profits from the pollution of the commons. Only GREEN jobs start to heal the ecocide morass bequeathed humanity by the socially enabled capitalistic paradigm of the last 200+ years.

  11. Mike Roddy says:

    Good point, Wes. Media failure is an obsession of mine, but solutions are not obvious at all.

  12. Merrelyn Emery says:

    Right on Leif, ME

  13. Raul M. says:

    A luxury tax on fossil fuels would be nice and weather disasters happen enough so that we won’t forget that the tax is to pay for weather disasters.

  14. BBHY says:

    Chris Hayes does a little better on climate, but still your point is very valid.

  15. BBHY says:

    Whenever I see someone commenting online about Al Gore using too much energy I like to remind then that a carbon tax would address that. People with a big carbon footprint would have to pay for it.

    That shuts then up pretty quickly.

  16. Paul Magnus says:

    Just removing fossil fuel subsidies would have a huge impact on clean energy uptake.

  17. Raul M. says:

    If people weren’t buying the fossil fuels then they wouldn’t be paying the luxury tax. Gov. Uses lots of fossil fuels, duhh. Maybe gov. has mixed feelings about a fossil fuel luxury tax? Hence taking the tax to the ballot box. Gov. notices the cost of replacing infrastructure such as vehicles, for instance. Could be that care for replacement vehicles should include fuel efficiency to a larger concern than previously considered.
    Using less fossil fuels means less cause of extreme weather, another reason why it should be a luxury tax.
    It is a conflation of issues to say than fossil fuel burning is a necessary part of life. Science shows that burning the fossil fuels warms the planet and that a warmed planet makes for much more extreme weather. Hence tax the luxury of such warming and burning.

  18. BobbyL says:

    Koch funded or not there is as yet no definitive scientific evidence that climate change has had any effect on the number or intensity of tornadoes during the last 100 years or so in the US. Sad to say but Nova seems to do a better job of sticking to the science then a lot of climate activists even with its Koch funding.

  19. Philip Pease says:

    The consequences of failing to deal with the global climate change is horrendous. Global warming will cause sea level rise, more severe weather events, and many other conditions that we should choose to avoid.

    To me it would be crazy, dangerous, radical to ignore this most severe problem. If conservatism means choosing to preserve our way of life then choosing to stop global warming is in line with conservative principles.

    Pretending there is no problem is not a “conservative” stance; it is an “ignorant” stance.

    The fossil fuel corporations are lying to you when they push an ignorant stance; they know full well that burning fossil fuels create greenhouse gasses that absorb heat and that is causing the planet to heat up and changing the climate. Their motive is to keep their lucrative industry making money.

    To choose greed over compassion is not ethical. Fundamentalist Christians know such behavior is contrary to the teachings of Jesus the Christ.

    I call on all conservatives, especially Christians conservatives, to support the effort to save humanity from the hell on Earth that continuing to burn fossil fuels will lead. Put human well being ahead of big money making interests it the morally right choice.

  20. James says:

    Carbon dioxide traps heat. The more carbon we send into the sky, the hotter it gets.

  21. Calamity Jean says:

    Taxing carbon at the mine or well raises the price of fossil fuel not only domestically but also for users that the fuel is exported to in other countries. It would also allow the US to tax imports of things other than fuel to account for the “embodied energy” inherent in the product.

    A mine or wellhead tax would also be easier to administer.

  22. Calamity Jean says:

    Oh, very clever! Do you mind if I steal the idea?

  23. Mulga Mumblebrain says:

    Wes, I’ve seen Chomsky refer to climate destabilisation frequently, but not in a climate science way, as that is not his field of interest or expertise. However he is well aware of the catastrophe, and those who are causing it, who are the same people responsibly for the global geo-political system and its horrors, in which field Chomsky is an expert.

  24. Raul M. says:

    Could that cause a reversal of the reported great discoveries of oil and gas? Maybe it was the budget cuts that lead to ivory.towerism. Still think that the commonality of natural disasters would keep the fossil fuel luxury tax focused on adaptation mainly cause of direct need and some or more mitigation as people found that there are better ways than one person in a gov. van built for eight. Cause with gas prices the difference of double the gas mileage over 20 miles per day could be a couple hundred dollars a month. So with a 50 mile per gallon vehicle going the ribbon of commerce with only one or two people makes much more change in hand than one person going the same ribbon with a 20 mpg vehicle built for 8.

  25. Mulga Mumblebrain says:

    The so-called ‘free market’ is just the money power of the rich in action, ever-seeking greater profits and not caring a hoot how they get it. We need ‘moral markets’, ‘social markets’ based on real ‘freedom’ which only comes with equal market power ie as great as possible equality of wealth and income. That requires radical redistribution of wealth from the kleptocratic elite.