EPA rules need a carbon tax
By Pam Jones
For those deeply concerned about climate change, the new EPA rules limiting CO2 emissions from existing power plants are a welcome first step. However, there is room for improvement in the draft rules before they become final in June 2015. The biggest flaw is that they don’t explicitly name a carbon tax as a mechanism states could use to comply.
Among economists, a carbon tax is widely accepted as the most economically efficient and cost-effective way to reduce CO2 emissions. Detractors who argue against a carbon tax worry it will kill jobs, drag down the economy and burden families with higher energy bills. But a well-designed carbon tax that recycles revenue back to households and into the economy will protect families from rising costs and add jobs.
A recent study by Regional Economic Models Inc. found that a carbon tax in California would increase GDP and add hundreds of thousands of jobs — provided the revenue is returned to the public, either as tax cuts or direct payments. A similar study of a carbon tax in Massachusetts yielded the same result.
REMI is a leading economic modeling firm whose clients include the federal government, many state and regional governments and several leading universities, and their reports are independent and reliable.
It also just released a groundbreaking, 20-year analysis of the impacts of a gradually increasing national revenue-neutral carbon tax, and that study shows that under such a plan, the U.S. would reduce CO2 emissions to 50 percent of 1990 levels while growing the U.S. economy by $1.37 trillion and adding 2.8 million jobs. An estimated 158,000 of those would be in a four-state region that includes Tennessee.
The EPA draft rule for reducing emissions from existing power plants names cap-and-trade, renewable portfolio standards and energy efficiency measures as possible compliance mechanisms. A carbon tax should be added to that list. EPA officials have stated in public that states could use a carbon tax to comply, but if it is not in print, states won’t want to take the risk of not being in compliance.
The importance of this already has been demonstrated in Tennessee. It’s expected that our State Implementation Plan will be developed by the state Air Pollution Control Board. At their July 9 meeting, the board reviewed the EPA rule, and Deputy Director Quincy Styke pointed out that EPA guidance will be a major factor.
It’s therefore essential that the final EPA rule clearly specify a carbon tax as a viable means of compliance, and include guidance on the administration, implementation, price and escalation rate for a tax to satisfy requirements.
States should have as many options available to them as possible, as long as they are effective in reducing carbon emissions. A carbon tax would be highly effective and easy to administer. And if states choose to return the revenue to their citizens, it will also strengthen their economies. Officials in Tennessee should consider the simplicity and economic boost of a state carbon tax, and should add their voices to those asking the EPA to add this economist-preferred solution to the final rule.
Pam Jones is a member of the Nashville chapter of Citizens’ Climate Lobby.