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TOTAL IMPACT OF TAX IN CONNECTICUT
2020 $579 million
2021 $772 million
2022 $965 million
2023 $1.16 billion
2024 $1.35 billion
2025 $1.54 billion
2026 $1.74 billion
2030 $2.70 billion
2040 $4.63 billion
2050 $6.56 billion and so on forever
As one politician allegedly said, “a billion here, a billion there, and soon you’re talking real money.”
ENERGY TAX IS REGRESSIVE
“Low-income, households of color, multifamily and renting households spend a much larger percentage of their income on energy bills than the average family,” according to the Natural Resources Defense Council. An across-the-board energy tax is therefore “regressive,” i.e. “African-American and Latino households and renters in multifamily buildings who pay a disproportionate amount of their income for energy” will be greater impacted by such a tax than average- or high-income earners. Moreover, low-income families will have less means to change their energy use to lower-taxed fuels, which are prohibitively expensive to convert to. Now there is a rebate scheme proposed in the legislation where some 50% of the tax will be rebated to individual consumers. But this is a flat rebate where everyone receives the same amount, regardless of income and regardless of energy consumption. So a low-income, high-cost energy user will likely receive as a rebate far less than the tax imposed on them. This is a regressive tax. And as we know, the state has an abysmal history of keeping tax money to balance its budget by raiding trust funds that are supposed to be allocated to consumers or special projects, like transportation.
IMPACT ON ECONOMY
This website describes many of the direct cost impacts the proposed carbon tax will have. But how will it impact the economy as a whole?
Reporting in 2013, the National Association of Manufacturers (NAM) produced a study here on the effects of a carbon tax on Connecticut’s economy. The tax they looked at was $20/ton of CO2 produced, increasing 4% per year. So while initially larger than the $15/ton being proposed in this year, the current plan would grow much faster, increasing to $60/ton within 10 years while the NAM study assumes the tax will only be $24.23/ton within 10 years (growing 4% per year from a $20/ton start). Even with the tax at less than half what the 2018 bill proposes, NAM forecasts Connecticut will lose 18,000 jobs by year 10 of the tax and economic output will decline .3 percent. We can only assume that with the current bill at over twice the NAM rate, these numbers could do twice the damage that NAM forecasts.
Costs & benefits
Presumably, the purpose of this tax is to change consumption behavior in Connecticut. But we’ve seen huge variations in energy commodity prices that haven’t affected consumption. The EIA, for example, shows that gasoline consumption in Connecticut in 2015 was the same as in 2011, despite prices being more than $1/gallon less. Energy consumption is fairly inelastic.
Furthermore, even if this tax resulted in changes in consumption behavior in Connecticut, such changes will have no impact on climate change. As reported in U.S. News & World Report, the Intergovernmental Panel on Climate Change (IPCC) Assessment Report claims that even if the U.S. as a whole stopped emitting all carbon dioxide emissions immediately, the ultimate impact on projected global temperature rise would be a reduction of only about 0.08°C by the year 2050. China and India will dominate global carbon emissions for the next century, and there’s little the U.S., let alone Connecticut can do, to affect this. A Princeton University study likewise predicted that even if all countries stopped emitting CO2 entirely, the Earth would continue to gradually warm, before cooling off.
Connecticut is already doing a good job reducing its carbon footprint, without a carbon tax. As mentioned above, CO2e emissions, as reported by EIA, were 35.1 million metric tons in 2014. That’s down 18.4% from 2000. And the U.S. as a whole is down 7.5% over the same period. This tax is expensive, regressive, and does nothing to help the environment.
Carbon dioxide emissions by fuel type: EIA
Distillate fuel consumption in Connecticut: EIA
Gasoline sales in Connecticut: EIA
Avg. gasoline consumption per driver: The Motley Fool
Natural gas consumption in CT: EIA
CT energy consumption in BTUs: EIA
State carbon comparisons: EIA
Costs by Fuel
Gasoline emits about 19.6 lbs of CO2 per gallon according to EIA, which is 102 gallons per ton of CO2. Since the carbon tax in its first year is $15 per ton of CO2, that means the tax per gallon of gasoline is $0.147 in its first year. Since the average driver buys 656 gallons of gasoline, your annual cost will be $96.43 in the first year of the tax, and since over 1.5 billion gallons of gasoline are sold in the state every year, the total cost of this tax on gasoline for the state will be $235 million. We project these number below for years 1, 5 and 10 of the tax, but remember the tax increases forever, so eventually your cost will be thousands of dollars a year, and the cost of the tax on gasoline for society will be billions per year.
Gas tax/gall. Cost per driver Tax on CT
2020 $0.1470 $96.43 $235 million
2024 $0.3430 $225.01 $548 million
2029 $0.5880 $385.73 $939 million
Again, per EIA, natural gas when burned produces 117.1 lbs of CO2 per thousand cubic feet of gas. Since gas on your bills is measured in hundreds of cubic feet (ccf), this number converts to 11.71 lbs of CO2/ccf. A typical home burns about 1000 ccf of natural gas annually, and so emits about 11,710 lbs of CO2 or 5.86 tons of CO2. At a tax rate of $15/ton, a natural gas user would incur an annual cost of about $87.90 in the first year of the tax. Almost half of homes in CT use natural gas for heating, and burn some 253 million cu. ft. every year according to EIA. Doing the math, this results in a total first year tax of $223 million. We show these numbers below projected for years 1, 5 and 10 for natural gas.
Natgas tax/ccf Cost/home Tax on CT
2020 $0.0878 $87.82 $223 million
2024 $0.2049 $204.92 $519 million
2029 $0.3513 $351.30 $890 million
It’s interesting to note that Section 1 (b)(5) of the bill requires the state to “determine the amount of carbon dioxide equivalent that is released in the form of escaped methane due to the extraction, transport or distribution of natural gas before the point of consumption in this state and shall add an additional charge to the carbon price for all natural gas or natural-gas-based electricity.” In other words, you’ll also be taxed on leaked gas that you don’t even consume. This is a serious issue, as recently reported by the Sierra Club here.
Like we calculated for gasoline above, heating oil produces about 22.4 lbs of CO2 per gallon according to EIA, which is 89.29 gallons per ton of CO2. Since the carbon tax in its first year is $15 per ton of CO2, that means the tax per gallon of gasoline is $0.168 in its first year. About half the homes in CT use heating oil to keep warm, consuming about 438 million gallons, which would incur a total tax in CT of over $73 million. We project taxes through years 1, 5 and 10 below.
HO tax/gall. Cost/home Tax on CT
2020 $0.1680 $134.40 $73 million
2024 $0.3920 $313.60 $172 million
2029 $0.6720 $537.60 $294 million
Bioheat: This heating fuel is a blend of regular heating oil and vegetable oils (e.g. soy oil or rendered vegetable oil from restaurants). It’s being used now, in blends from 2 – 20%, in heating oil. Biofuels are exempt from the carbon tax, and we believe that your tax will be reduced proportionately according to the percentage of biofuel content in it. To learn more about Biofuels, please visit www.bioheatnow.com.
Like we calculated for other fuels above, propane produces about 12.7 lbs of CO2 per gallon according to EIA, which is 157 gallons per ton of CO2. Since the carbon tax in its first year is $15 per ton of CO2, that means the tax per gallon of gasoline is $0.0953 in its first year. If a home consumes 1,000 gallons of propane annually (heating, cooking, fireplace, grill, etc.) this tax will amount to $95.25 in its first year. We calculate from EIA data that some 110 million gallons of LP gas (i.e. propane) are consumed in CT, which would incur a total tax in CT of over $11 million in the first year of the tax. We project taxes through years 1, 5 and 10 below.
Propane tax/gall. Cost/home Tax on CT
2020 $0.0953 $95.25 $11 million
2024 $0.2223 $222.25 $25 million
2029 $0.3810 $381.00 $42 million
The carbon tax is also imposed on electricity use, but only that portion that is derived from burning coal, natural gas or diesel. Useful information is provided by ISO New England here. This states that for New England as a whole, 49% of electrical generation was from natural gas, 1.1% from diesel, and 1% from coal. The balance is from non-carbon emitting sources such as nuclear and renewables. We therefore calculate the pro-rate input of taxable fuels into the power generation mix to get these results.
Tax/KWhr Electric tax per household/yr
2020 $.00156 $18.77
2024 $.00365 $43.80
2029 $.00626 $75.08
1o Reasons to Oppose a Carbon Tax
A “carbon tax” is a tax on energy. Through July 2015, over 80 percent of domestic energy consumption came from natural gas, oil, and coal. A carbon tax would impose an indirect tax on these fuels due to their carbon dioxide emissions. Below are ten reasons carbon taxes should be opposed:
The Truth About Carbon Taxes
The truth about Carbon Taxes an why the French forced their government to back down.
Why not a carbon tax
A recently released 146 page “carbon pricing analysis” comes to the conclusion that making fuel unaffordable will force people to use less. Below are some more take aways from the report.