A proposal being considered by the Rhode Island Senate would establish a carbon-dioxide tax on fossil fuels, including gasoline, natural gas, coal, propane, and “any other petroleum product,” starting in 2019. The purpose of the carbon tax is to decrease carbon-dioxide emissions by levying a tax based on the amount of emissions produced. The tax would begin at $15 per ton in the first year and increase by at least $5 per ton each subsequent year. However, the tax would not come into effect until neighboring Massachusetts and Connecticut also passed coordinated, virtually identical carbon-dioxide tax legislation.
The proposal would also establish a “clean energy and jobs fund” that would be used to “help residents and employers transition to cleaner energy options and mitigate any potential economic harm from the carbon price imposed” in the bill, including “direct dividends” to both employers and state residents.”
The dividends are necessary because carbon dioxide taxes are inherently regressive and disproportionally harm low-income families. The Congressional Budget Office (CBO) found a $28 per ton carbon tax would result in energy costs being 250 percent higher for the poorest one-fifth of households than the richest one-fifth of households.
CBO reports the reason for cost discrepancy is “a carbon tax would increase the prices of fossil fuels in direct proportion to their carbon content. Higher fuel prices, in turn, would raise production costs and ultimately drive up prices for goods and services throughout the economy … Low-income households spend a larger share of their income on goods and services whose prices would increase the most, such as electricity and transportation.”
A 2013 study by the National Association of Manufacturers estimated a $20-per-ton carbon-dioxide tax in Rhode Island, which would be reached in 2020 under the proposed bill, would result in a 40 percent increase in the price of natural gas. The study also estimated gasoline prices would be 20 cents per gallon higher and that there would be a 22 percent increase in household utility rates. Incredibly, all this is projected to occur in the first year.
Another problem with a carbon-dioxide tax is any environmental benefits that it might produce would be effectively meaningless without concomitant legislation enacted throughout the rest of the globe.
In a December 2015 speech to the U.N. Framework Convention on Climate Change (UNFCCC), former Secretary of State John Kerry said, “The fact is that even if every American citizen biked to work, carpooled to school, used only solar panels to power their homes, if we each planted a dozen trees, if we somehow eliminated all of our domestic greenhouse gas emissions, guess what—that still wouldn’t be enough to offset the carbon pollution coming from the rest of the world.” A state-based carbon tax would have even less impact on global temperatures.
It is likely for these reasons the U.S. public finds the idea of a carbon tax so unpopular. A September 2016 poll conducted by the Energy Policy Institute at the University of Chicago and by the Associated Press-NORC Center for Public Affairs Research revealed 71 percent of respondents said they were unwilling to pay an extra $20 month on their electric bills to combat climate change, although this amount is “roughly equivalent to what the federal government estimates the damages from climate change would be on each household.” Further, almost half the respondents, 42 percent, said they would be unwilling to pay even one extra dollar.
At 17.01 cents per kilowatt hour, Rhode Island currently has the second-highest retail electricity prices in the continental United States, according to the U.S. Energy Information Administration. A 2016 WalletHub study also found at $338 a month, Ocean State residents face the third-highest total energy costs in the country, and the Tax Foundation already ranks Rhode Island’s tax climate the country’s 44th worst. A carbon-dioxide tax would make everything more expensive for working families in Rhode Island, who are already pinched by the state’s high costs, leaving them less to spend and save – all without any guaranteed environmental benefits.
Tim Benson a Policy Analyst for The Heartland Institute.