Research & Commentary: Oregon Carbon Tax

Published October 13, 2014

On August 14, 2013, Oregon passed a bill authorizing a study of the feasibility of a statewide carbon tax. The study is expected to be presented to legislators on November 15, 2014.

Proponents argue a carbon tax would provide Oregon with a more stable stream of revenue that would reduce dependence on more-volatile income tax revenue and “augment or replace portions of existing revenues.” However, critics of carbon taxes, such as Heartland Institute President Joe Bast, argue creating a new source of revenue will simply lead to more spending. “New sources of tax revenue invariably result in higher government spending. Taxes and spending are already too high and are contributing to an economic crisis. No one who understands these basic truths can also support a carbon tax,” Bast wrote.

Pat Michaels of the Cato Institute’s Center for the Study of Science analyzed the state carbon tax proposed for Kansas in 2008, and using a widely accepted formula developed by the National Center for Atmospheric Research, found even if the bill led to a 10 percent net reduction in CO2 emissions and was passed by every state in the nation, it would prevent only a 0.11 º F of global warming per century—far less than the background effect of natural variability.

In 2012, Australia implemented the first explicit national tax on carbon emissions, and economists observed the tax made the nation’s government budget deficit worse, not better; raised electricity prices; and led to a spike in unemployment. Australia repealed the tax just two years later.

A carbon tax would have a lesser chance at success at the state level than nationally, because manufacturers have greater mobility between states. Hence, state carbon taxes are a particularly risky strategy for generating revenue, while producing globally insignificant emissions reductions.

State carbon taxes fail both as a climate policy and as an efficient tax policy. Even worse, history shows a cut in existing tax rates is always a temporary measure, whereas new taxes nearly always become permanent. Oregon lawmakers should rein in government spending and pursue tax reform that simplifies the state’s tax code and lowers tax rates to encourage economic growth and job creation.

The following documents offer additional information on carbon taxes.


Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to help deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography. 

Carbon tax, the Cover Oregon of tax reform: Editorial Agenda 2014
This September 2014 editorial from The Oregonian examines the carbon tax and calls the idea the “Cover Oregon” of tax reform, comparing it to the state’s failed health insurance exchange. It argues the global warming mitigation efforts of a single state are unlikely to produce any noticeable effects, and legislators should instead develop a more modest tax reform proposal, given the unpopularity of sales taxes and the arguments against a carbon tax. 

Oregon Business Leaders Call for Action on Climate Change reports, “Over 200 familiar Oregon businesses, from behemoths Nike and Intel, to household names like the Portland Timbers and the Portland Trailblazers, have joined together to urge Oregon to lead on climate change.” 

Dissecting the Carbon Tax
Kenneth Greene, a resident scholar at the American Enterprise Institute, recounts how he was first deceived by the supposed economic benefits of carbon taxes and how his views have evolved, given the dubious track record of other eco-taxes being raided for general spending. 

Kansas Legislature Was Wise to Reject Carbon Tax
Writing in Heartlander, Cato Institute Senior Fellow Patrick Michaels discusses a Kansas bill on carbon dioxide emissions. Michaels reports if the bill’s costly provisions were applied to every country that signed the 1997 Kyoto Protocol, it would prevent only 0.27 º F of warming per century, a figure too small to even measure. 

A Primer on the Economics of Carbon Taxes and Cap-and-Trade Systems
Jim Johnston, a retired economist and Heartland Institute board member, analyzes the pros and cons of the two most prominent government schemes to combat carbon dioxide emissions—cap-and-trade schemes and carbon taxes. 

Heartland Institute Announces its Opposition to Carbon Taxes
Heartland Institute experts react to the bipartisan campaign to promote a carbon tax swap during the 2012 lame duck session of Congress, citing the poor track record of tax swaps, unaddressed spending problems, and the evidence against belief in an ongoing manmade climate change catastrophe. 

Global Carbon Dioxide Emissions Increase by 1.0 Gt in 2011 to Record High,27216,en.html
The International Energy Agency reports key findings from its signature report, World Energy Outlook 2011, including the United States’ world-leading reduction in carbon emissions having failed to prevent a record high in global carbon emissions from fossil-fuel combustion. 

Research & Commentary: Extreme Weather
Taylor Smith of The Heartland Institute outlines the “Extreme Weather” chapter of Climate Change Reconsidered II: Physical Science, a 2013 report from the Nongovernmental International Panel on Climate Change (NIPCC), an independent group of some 50 scientists from 15 countries. The chapter summarizes the large body of research identifying historical trends in extreme weather events and examines how they interrelate with other weather and climate variables. 

Massachusetts Carbon Tax Proposals Just Won’t Cut It
Tax Foundation Economist Lyman Stone examines Massachusetts’s carbon tax proposals and finds they would add distortions to the tax code while proving useless as an environmental policy because of the mobility of carbon-intensive industries, such as manufacturing.


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 and other topics, visit the Web site of Environment & Climate News at, The Heartland Institute’s Web site at, and PolicyBot, Heartland’s free online research database, at

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Pike, Heartland’s state government relations manager, at [email protected] or 312/377-4000.