02/28/2013

NAM: Carbon Tax Could Decrease Manufacturing Output 8-15%

On February 26, the National Association of Manufacturers released a study conducted by NERA Economic Consulting that shows a carbon tax would have a devastating impact on manufacturing. The report, Economic Outcomes of a U.S. Carbon Tax, found that levying such a tax would result in a substantial impact on jobs and higher prices for natural gas, electricity, gasoline and other energy commodities. As a result, manufacturing output in energy-intensive sectors could drop by as much as 15 percent and in non-energy-intensive sectors by as much as 7.7 percent.

The study examines two carbon tax scenarios: one levied at $20 per ton increasing at 4 percent annually and the other designed to reduce carbon dioxide (CO₂) emissions by 80 percent. In both scenarios, a carbon tax would lead to lower real wage rates because companies would have higher costs and lower labor productivity. Over time, workers’ incomes could decline relative to baseline levels by as much as 8.5 percent. The increased costs of coal, natural gas and petroleum products due to a carbon tax would ripple through the economy, resulting in higher production costs, less spending on non-energy goods, fewer jobs and slower economic growth.

Please click on the links for the executive summary and full report.

Included in the release is the impact of 10 hard-hit states, which can be reviewed by clicking here.