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Vitter: CBO Report Says Carbon Tax Would Negatively Affect Economy

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Location: Washington, DC

Sen. David Vitter (R-La.), the top Republican on the Committee on Environment and Public Works, today commented on a Congressional Budget Office (CBO) report on the impacts of a carbon tax. According to CBO, reductions in emissions in the U.S. would "probably have only a modest effect on the Earth's climate unless they were part of a coordinated effort with other countries." Earlier this year, Vitter introduced legislation to prohibit the regulation of carbon dioxide and other greenhouse gas emissions in the U.S., until China, India and Russia implement similar reductions. Click here to read more.

"It's not just energy prices that would skyrocket from a carbon tax: the cost of nearly everything built in America would go up," Vitter said. "Let's not lose sight of how big of a dud cap-and-trade was in 2009. A carbon tax is really no different. China, India and Russia, some of the world's largest carbon emitters, have not shackled their economies with burdensome regulations. You always hear proponents talk about regulating or taxing carbon dioxide, but you never hear them address the consequences of how it would increase the cost of energy for those least able to afford it, or the detrimental effects on domestic manufacturing and jobs."

Excerpts from the CBO report:

"Without accounting for how the revenues from a carbon tax would be used, such a tax would have a negative effect on the economy. The higher prices it caused would diminish the purchasing power of people's earnings, effectively reducing their real (inflation-adjusted) wages. Lower real wages would have the net effect of reducing the amount that people worked, thus decreasing the overall supply of labor. Investment would also decline, further reducing the economy's total output.

"Acting on its own, the United States could have only a modest effect on the amount of warming. In particular, efforts to limit global warming are likely to require significant reductions in emissions by rapidly growing economies, such as those of China and India."

"Higher fuel prices, in turn, would raise production costs and ultimately drive up prices for goods and services throughout the economy...Thus, consumers would see the biggest price increases for items such as gasoline and electricity."

EPW Committee Chairman Barbara Boxer (D-Calif.) and Sen. Bernie Sanders (I-Vt.) introduced legislation to enact a carbon tax of $20 per ton. According to the CBO report, low-income households would bear the burden of a carbon tax disproportionately. The report states, "A tax of $20 per ton of emissions would raise the price of gasoline by about 20 cents per gallon."

Vitter has been pushing the Administration to show their work on a potential carbon tax, but the Treasury Department has been wholly unresponsive. Vitter wrote a column for Roll Call on November 29, 2012, "Carbon Tax Discussions Should Be Done Openly."


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