Legislation introduced in the Utah Senate would establish a carbon-dioxide tax on all fossil fuels emitted or sold by distributors in the Beehive State, including on “motor fuel, special fuel, aviation fuel, natural gas, petroleum, coal, or any form of solid, liquid, or gaseous fuel derived from these products, including still gas, propane, or petroleum residuals.”
The tax on motor fuel would start in 2024 and 8.89 cents per gallon, and annually rise by 3.5 percent until the tax would cap out at 88.9 cents per gallon. The tax on special fuels would begin in 2024 at 10.16 cents per gallon, rising to $1.02 per gallon, while the tax on aviation fuel would start at 9.57 cents per gallon and top out at 95.7 cents per gallon.
The tax on natural gas would start at 53.12 cents per 1,000 cubic feet and would rise annually by 3.5 percent to $53.12 per 1,000 cubic feet. Taxes on “large emitters” of carbon dioxide (CO2) emissions would begin at $10 per metric ton of CO2 emitted, rising to $100 per metric ton.
The bill would also create an interest-earning “Carbon Emissions Tax Refund Restricted Account” that the Legislature could use the funds from which to lower other state taxes.
A Fiscal Note prepared for the bill found that while the funds from the account could lower sales taxes paid by individuals and business in Utah by $103.6 million in fiscal year (FY) 2024, $259.9 million in FY2025, and $271.6 million in FY2026, the carbon-dioxide tax itself would raise $137.8 million in FY2024, $609.8 million in FY2025, and $652.8 million in FY2026. This means a $34.2 million tax increase for Utah residents and businesses in FY2024, a $349.9 million tax increase in FY2025, and a $381.2 million tax increase in FY2026.
Unlike many other carbon tax bills proposed in other states, there is also no provision to return any collected tax revenue to low-income families or businesses in the form of a direct rebate or dividend. These rebates and dividends are important because carbon-dioxide taxes are inherently regressive and disproportionally harm low-income families.
The Congressional Budget Office (CBO) also 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.”
One other substantial problem with the carbon-dioxide tax is that it would produce an insignificant environmental benefit, as a country-wide carbon tax that completely reduces U.S. emissions to zero by 2050 would only avert global temperature by just 0.2 degrees Celsius by 2100. A state-based carbon dioxide tax would have even less impact on global temperature. As Oren Cass, senior fellow at the Manhattan Institute, noted in National Affairs, “The effectiveness of a carbon tax as a matter of environmental policy [depends] not only on how it would directly alter the trajectory of [local] emissions but also on its ability to affect global emissions by driving globally applicable technological innovation or by influencing the behavior of foreign governments,” wrote Cass. “On each of these dimensions, the carbon tax fails.”
At 8.27 cents per kilowatt hour, Utah currently has the fourth-lowest retail electricity prices in the United States, well below the national average, according to the U.S. Energy Information Administration. Also, a 2021 WalletHub study found at $311 per month, Utahans face total energy costs just below the national average, and the Tax Foundation ranks Utah’s tax climate the country’s tenth-best. A carbon-dioxide tax would do nothing to help these rankings, and would make everything more expensive for working families in Utah, leaving them less to spend and save – all without any guaranteed environmental benefits.
The following documents provide more information about carbon-dioxide taxes and fossil fuels.
The Carbon Tax: Analysis of Six Potential Scenarios
https://www.instituteforenergyresearch.org/wp-content/uploads/2018/10/The-Carbon-Tax-Analysis-of-Six-Potential-Scenarios_Final.pdf
This study commissioned by the Institute for Energy Research and conducted by Capital Alpha Partners uses standard scoring conventions to evaluate and model the economic impacts of carbon taxes set at a variety of dollar figures, with different phase-in durations, and with an array of revenue-recycling strategies. It finds a carbon-dioxide tax will not be pro-growth, is not an efficient revenue raiser for tax reform, depresses GDP and introduces with long-term fiscal challenges playing particular stress on the states, and is inconsistent with meeting the long-term Paris Agreement emissions reduction goals.
Carbon Taxes: Bad for the People, the Economy, Government Revenues (Guest: Jordan McGillis)
https://heartland.org/multimedia/podcasts/carbon-taxes-bad-for-the-people-the-economy-government-revenues-guest-jordan-mcgillis
In this edition of the Heartland Daily Podcast, Jordan McGillis of the Institute for Energy Research (IER) discusses an economic analysis produced for IER of six different possible versions of a tax on carbon dioxide. The study found none of the of the six versions of the tax considered would be revenue neutral or satisfy the requirements of the Paris Climate Agreement, but each of them would reduce economic growth, impede infrastructure development, and limit the government’s ability to meet fiscal obligations and operations. People would stripped of choice and made poorer for no environmental gain.
Does a Carbon Tax Support Prosperity?
https://files.texaspolicy.com/uploads/2018/08/16104452/2018-04-PP-CarbonTaxSupportProsperity-ACEE-CEP-IngramGinn.pdf
This study from the Texas Public Policy Foundation finds that research supporting the imposition of a carbon-dioxide tax are based on modeling with flawed assumptions and the tax itself would cause crippling economic costs. Two real life examples of a carbon-dioxide tax gone wrong in British Columbia and in Australia show that its potential effects include skyrocketing household electricity prices and increasing unemployment.
The Deeply Flawed Conservative Case for a Carbon Tax
https://heartland.org/publications-resources/publications/the-deeply-flawed-conservative-case-for-a-carbon-tax
In this paper published by the American Enterprise Institute, Benjamin Zycher says the “conservative” Climate Leadership Council’s (CLC) much-hyped carbon-dioxide tax proposal is “naïve” and “virtually all of the … assertions in support of its proposal are incorrect or implausible.” The CLC’s plan is “poor conceptually and deeply unserious,” wrote Zycher.
Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy
https://www.pacificresearch.org/wp-content/uploads/2018/12/LegislatingEnergy_F_Web.pdf
This analysis from Wayne Winegarden of the Pacific Research Institute shows the big government approach to fighting climate change taken by California and New York hits working class and minority communities the hardest. The paper reviews the impact of global warming policies adopted in California and New York, such as unrealistic renewable energy goals, strict low carbon fuel standards, and costly subsidies for buying higher-priced electric cars and installing solar panels. The report finds that, collectively, these expensive and burdensome policies are dramatically increasing the energy burdens of their respective state residents.
The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
https://files.texaspolicy.com/uploads/2018/11/27165514/2018-11-RR-US-Leads-the-World-in-Clean-Air-ACEE-White.pdf
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.
The Case Against a U.S. Carbon Tax
https://heartland.org/publications-resources/publications/the-case-against-a-us-carbon-tax
In this paper from the Cato Institute, Robert P. Murphy, Patrick J. Michaels, and Paul C. Knappenberger examine carbon-dioxide tax programs in place in Australia and British Columbia and consider whether similar programs would be successful in the United States. They conclude, “In theory and in practice, economic analysis shows that the case for a U.S. carbon tax is weaker than its most vocal supporters have led the public to believe.”
Economic Outcomes of a U.S. Carbon Tax
https://heartland.org/publications-resources/publications/economic-outcomes-of-a–us-carbon-tax
This report from the National Association of Manufacturers evaluates the potential impacts carbon-dioxide taxes whose revenues would be devoted to a combination of debt and tax rate reduction would have on the U.S. economy. The results consider the varied economic effects of fossil-fuel cost increases caused by carbon taxes, as well as the positive economic effects of the assumption that carbon-dioxide tax revenues would be used to reduce government debt and federal taxes.
Ten State Solutions to Emerging Issues
https://heartland.org/publications-resources/publications/ten-state-solutions-to-emerging-issues-2018
This Heartland Institute booklet explores solutions to the top public policy issues facing the states in 2018 and beyond in the areas of budget and taxes, education, energy and environment, health care, and constitutional reform. The solutions identified are proven reform ideas that have garnered significant support among the states and with legislators.
The Carbon Tax Shell Game
https://heartland.org/publications-resources/publications/the-carbon-tax-shell-game
Oren Cass of the Manhattan Institute argues the carbon-dioxide tax is a shell game. The range of designs, prices, rationales, and claimed benefits varies so widely that assessing the validity of most proposals is nearly impossible to accomplish. In this article for National Affairs, Cass says the effect of carbon-dioxide taxes on emissions has proven to be insubstantial, a fact he says is ignored by the tax’s proponents when promoting its purported benefits.
The Social Benefits of Fossil Fuels
https://heartland.org/publications-resources/publications/the-social-benefits-of-fossil-fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.
Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://heartland.org/publications-resources/publications/climate-change-reconsidered-ii-fossil-fuels—summary-for-policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).
Less Carbon, Higher Prices: How California’s Climate Policies Affect Lower-Income Residents
https://heartland.org/publications-resources/publications/less-carbon-higher-prices-how-californias-climate-policies-affect-lower-income-residents
This study from Jonathan Lesser of the Manhattan Institute argues California’s clean power regulations, including the state’s renewable power mandate, is a regressive tax that harms impoverished Californians more than any other group.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
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Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
