Thursday, March 12, 2015

Is it Time for Carbon Taxes at the State/Provincial/City Sub-national Level?

Economic and Emissions Impacts of a Clean Air Tax or Fee in Oregon (SB306) (169 page pdf, Legislative Revenue Office, State of Oregon, Dec. 2014)

Also discussed here: Time to talk carbon tax: Conversation kicks off with Medford rally, report from PSU (Wendy Culverwell, Portland Business Journal, Dec. 5, 2014)

And here: Carbon Tax and Shift: How to make it work for Oregon’s Economy. (36 page pdf, Liu, Jenny H. and Renfro, Jeff, Northwest Economic Research Center Report, Mar. 1, 2013)

And here: Lima Call for Climate Action Puts World on Track to Paris 2015 (Press Release, United Nations Framework Convention on Climate Change, Dec. 14, 2014)

And here: NAZCA- The Non-state Actor Zone for Climate Action (Cooperative And Individual Actions On Climate Change In Partnership With Countries , United Nations Framework Convention on Climate Change, Dec. 2014)

On the eve of the UN’s last Conference of the Parties (COP20) in Lima which aimed to lay out a path to achieve the major reductions in carbon emissions needed by 2050, we review the plans and analyses of a state in the northwest USA. Oregon is considering a levy that would reduce its emissions to 1990 levels by 2030 at $100/ton tax. Detailed economic impacts include the gain in revenue of over $2B at a carbon tax of only $60/ton. Potential negative impacts such as reduced tourism income or a loss of competitiveness with neighboring states were found to be small or insignificant. This is precisely the kind of effort needed by sub-national entities to be able to make long and short term commitments which would reduce the severity of climate change impacts

. oregon carbon tax  
Key Quotes:

 A new 2015 agreement on climate change, that will harness action by all nations, took a further important step forward in Lima following two weeks of negotiations by over 190 countries. Nations concluded by elaborating the elements of the new agreement, scheduled to be agreed in Paris in late 2015, while also agreeing the ground rules on how all countries can submit contributions to the new agreement during the first quarter of next year.”

“Although a number of northern European countries such as Norway, Ireland …and Sweden have instituted carbon taxes, the BC carbon tax is unique as the first carbon tax to be implemented across all economic sectors in North America”

 “The consumption of refined petroleum products between 2008-2011 decreased by 15.1% in BC and increased by 1.3% in the rest of Canada, and the consumption of motor gasoline in the same period decreased by 4.0% in BC and increased by 3.3% in the rest of Canada.”

“In 2010, Ireland began to levy a carbon tax on fossil fuels, including kerosene, diesel fuel, liquid petroleum, fuel oil, and natural gas, and the tax was expanded to include solid fuels such as peat and coal in 2012….The tax is estimated to generate €500 million in revenue in 2013, and can potentially offset approximately 3.5% of the Irish income tax”

“The Oregon Legislature allocated $200,000 to the study, which was designed to look at how a carbon tax will affect the state and business”

 “A separate 2013 report from the Northwest Economic Research Center calculates that levying a $60 tax for every ton emitted would raise more than $2.1 billion for state coffers. It notes that it would take a tax of $100 per ton to reduce Oregon emissions to 1990 levels by 2030.”

 “putting a price on carbon in Oregon can result in reductions in harmful emissions and have positive impacts on the economy.. Carbon emissions impose negative externalities on society, such as damage to property and critical infrastructure, increased health costs, losses of natural resources including drinking water supplies and other potential effects of climate change, leading to serious global market failures. Thus, the social costs of climate change need to be incorporated into the decision-making processes of energy suppliers, consumers and policy makers to reduce potential economic inefficiencies and major economic losses”

“A carbon tax is efficient when its rate is set at a level that is equivalent to the full marginal social cost of carbon (SCC), and it is also effective when it achieves its intended policy objectives. “

“As a general rule of thumb, a carbon price of $1 per mTCO2 corresponds to a $0.01 increase in the price of a gallon of gas. For natural gas, we expect a carbon price of $10 per mTCO2 to lead to a 3% increase in price and a carbon price of $100 per mTCO2 to increase prices by 31%.”

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