And that mistake is being used to make policy.
Though American emissions of CO2 have already dropped dramatically due to the switch to natural gas, the Obama administration directed the Environmental Protection Agency to create new regulations limiting carbon emissions from power plants. Government fixing a problem that is already fixing itself despite government interference is bad, right?
Perhaps not. A report by Regional Economic Models, Inc., which creates customized economic impact studies for governmental and private-sector clients (Citizens Climate Lobby, in this case), says that a carbon tax won't be a tax at all, it will be a job creation engine. And it will reduce greenhouse gas emissions. It's another take on the common 'every $1 in taxes you pay leads to $1.30 in revenue' Keynesian mythology that has taken hold.
The report was created by simulating a tax on the carbon-dioxide content of fossil fuels. The tax would start at $10 per ton, increasing at $10 per ton each year. Then by redistributing the revenue from the tax would be returned to households in equal shares as direct payments, they claim it will somehow would add 2.1 million jobs over ten years. They also project that improvements in air quality would save 13,000 lives a year, though that number is more guess than evidence-based. Emissions would decline by 33 percent, they estimate.
"Detractors have said that a carbon tax will kill jobs," said Mark Reynolds, executive director of Citizens Climate Lobby, which commissioned the study. "The REMI study turns that assumption on its head."
Well, it contradicts economic history with a model. That isn't a refutation.
"If Republicans don't want more EPA regulations, their best recourse is to deliver a revenue-neutral carbon tax, which is supported by conservatives from George Shultz to Greg Mankiw," said Reynolds. "With the REMI study showing a carbon tax that returns revenue to households will add millions of jobs, this is the option everyone can embrace."
A copy of the paper can be downloaded here.
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