October 20, 1992
The Dallas Morning News
Vice presidential candidate Al Gore has recommended a tax on carbon-based fuels as a way to reduce carbon dioxide emissions, cut air pollution and save energy. Because of his support for the tax, he is under attack. Rich Bond, chairman of the Republican National Committee, recently called Mr. Gore an “international environmental extremist.’
A carbon tax, which is being discussed and implemented by countries around the world, could mean higher electric rates and gasoline prices for consumers. It also could be very profitable for Texas. The idea is simple: Add a surcharge to any fuel product containing carbon (like coal, oil and natural gas) and use the revenue to fund energy efficiency, environmental cleanup and renewable energy sources like solar and wind power.
In his book, Earth in the Balance, Mr. Gore writes, “There is an economic rule of thumb: Whatever we tax, we tend to get less of; whatever we subsidize, we tend to get more of. Currently, we tax work and we subsidize the depletion of natural resources — and both policies have contributed to unemployment and the waste of natural resources. What if we lowered the tax on work and simultaneously raised it on the burning of fossil fuels?’
Texas oil producers are quick to criticize the proposal, saying the carbon tax is just a new way to tax production and energy consumption. But despite their opposition, such a tax could have long-term benefits for the Texas economy.
One of the goals of the state’s new Energy Planning Process is to increase its energy revenue. Increasing the demand for natural gas has been a highly touted aspect of this plan because Texas has a surfeit of gas. At current rates of consumption, Texas has enough gas to last more than 100 years.
Natural gas contains less carbon per unit of energy than fuel oil or coal, so it would be taxed at a lower rate. Thus, energy consumers would have an economic incentive to switch to natural gas. More gas consumption would boost wellhead tax revenue for the state.
The carbon tax would have an immediate effect on electric rates. Fifty-five percent of all electricity in Texas is generated by burning coal. And because coal contains more carbon than oil or natural gas, it would be taxed heavily and electric rates would rise. (Texas now burns more coal — 89 million tons last year — than any other state.) Increased taxes on coal could induce utility companies to switch to natural gas for power generation — helping the Texas economy.
Texas also could profit by exploiting renewable energy sources like small-scale solar power plants in Austin and wind projects like those in the Panhandle.
A tax on carbon would help bring U.S. gasoline prices into line with other nations around the world. Americans enjoy some of the lowest fuel prices in the world. The British now pay about $4 per gallon of gasoline. In 1990, the United States had the lowest gasoline prices since 1918, when measured in real terms.
An increase in American energy prices would reduce consumption of imported oil and help our balance of trade. Pete Emerson, an economist with the Environmental Defense Fund in Austin, says that our biggest import commodity is not the $20 billion worth of cars from Japan each year but the $50 billion on imported oil.
Over the past 18 months, Finland, Holland and Sweden have adopted the tax. The idea was a primary topic of discussion at the Earth Summit in Rio de Janeiro this spring. The carbon tax is favored by Belgium, France, Germany and Denmark. The Congressional Budget Office issued a report in 1990 that said a tax of $110 per ton of carbon would produce $120 billion in annual revenue with minimal effect on the U.S. economy.
Implementing the carbon tax would require a restructuring of the tax code. Income taxes could be reduced dramatically. Clearly, the carbon tax is not the idol of some lunatic fringe. To say the carbon tax is the idea of an “extremist’ ignores the realities of our world and the benefits the tax would create for Texas and the rest of the country.