Gas at $240 per gallon? IPCC report lays out high cost of carbon taxes
By Vance Ginn and Elliott Raia Over the river and through the woods – if you can afford it. The holiday season is nearing, and families are starting to think about travel. But visiting grandma could soon be cost-prohibitive, if the U.N.’s Intergovernmental Panel on Climate Change (IPCC) has its way. The IPCC claims in its latest report that action must be taken to avert global warming of 1.5 degrees Celsius by the end of the century — a benchmark it says comes with costly climate consequences. Its recommendation: a carbon tax of as much as $200 per ton of carbon dioxide emissions by 2030 to an astonishing $27,000 per ton by 2100. For America families, this could mean the price of gasoline soaring to $240 per gallon. Remember when we thought $4 per gallon was high? The IPCC’s recommendations should be taken with a grain of salt because of seriously flawed economic models. But we must take a carbon tax seriously, as the idea gains traction. What would a carbon tax mean for American families? Regardless of the amount, a carbon tax would erode gains of the recent tax and regulatory cuts by the Trump administration. It would disproportionately hurt the poor and middle class, who pay a higher percentage of their incomes for motor fuel and energy. And it would decrease incentives for new innovations to improve our lives, such as hydraulic fracking. In other words, a carbon tax would hurt all of us. Concrete, for example, is perhaps one of the most common carbon-intensive products due to its production process. When was the last day you didn’t have contact with concrete? Homes, businesses, and roads — all built with concrete, and all incredibly important for economic prosperity — would undoubtedly rise in cost because of a carbon tax. For instance, converting the National Ready Mix Association’s figures for each cubic yard of concrete produced shows there are more than 1.85 tons of carbon dioxide emitted during the production process. At the IPCC rate of $200 per ton of carbon dioxide emissions by 2030, the cost of building with concrete would rapidly rise. Even at a seemingly modest $40 per ton of carbon dioxide emissions — a figure claimed to be a “conservative carbon tax”— a carbon tax would add a huge cost to buildings and roads. Take a new home of 3,000 square feet. A simple slab foundation (with no basement) could use 100 cubic yards of concrete. Adding a $370 tax per cubic yard for a ton of carbon based on the $200 rate above would mean the cost of that home would likely rise $37,000. New commercial buildings, with foundations and big parking lots, would be astronomically more expensive. Let’s include highway construction. We’re seeing more and more 12-lane highways in our cities. Each mile of building such a highway requires almost 31,000 cubic yards of concrete, which could come with a total carbon duty of more than $11 million – that’s on top of normal construction costs. While production of concrete is just one example, it highlights how a carbon tax could affect Americans far beyond the energy sector, where the vast majority of carbon dioxide emissions originate. When energy is included, particularly the affordable, reliable energy provided by fossil fuels that have allowed millions to rise up from poverty, the demands made by the IPCC guarantee economic decay. There’s clear proof of this. Carbon taxes in Australia and British Columbia reduced standards of living, with Australia eventually repealing its carbon tax within just two years. According to the Australian government, when the tax was repealed, families felt immediate and significant relief. “Treasury has estimated that household costs should on average be about $550 lower in 2014-15 than they would be with the carbon tax,” a report from the Department of the Environment found. “On average, household electricity bills are estimated to be $200 lower and household gas bills $70 lower than they would be with a carbon tax in 2014-15.” It also found that “Removing the carbon tax eliminates an administrative and compliance burden on business, which is estimated to cost $85 million per year.” While many are concerned about the potential role of manmade climate change, it’s essential to balance the statistical uncertainty that the IPCC admits in its reporting with the well-tested and known dangers of forcing flawed government programs on a growing economy. The best path forward in addressing both the economic prosperity and environmental preservation is to remove government barriers to competition in the energy sector and beyond. Vance Ginn (@VanceGinn) is Director of the Center for Economic Prosperity, and Senior Economist and Elliott Raia is a Policy Analyst for Federal Affairs, both at the Texas Public Policy Foundation.