Proposed Carbon Tax Will Prove Harmful to Manufacturing

27. February 2013



When I sit and my desk and write, I sometimes get so wrapped up in reporting what is going on in the world of moldmaking, that I often don’t pay enough attention to how news outside my moldmaking “bubble” can affect our industry. But today a report came across my desk yesterday that caused me to sit up straighter in my chair.

The National Association of Manufacturers (NAM) released a study conducted by NERA Economic Consulting that shows a carbon tax would have a devastating impact on manufacturing—and jobs. The report, titled Economic Outcomes of a U.S. Carbon Tax, found that levying such a tax would impact millions of jobs and result in higher prices for natural gas, electricity, gasoline and other energy commodities. It also reported that manufacturing output in energy-intensive sectors could drop by as much as 15.0 percent and in non-energy-intensive sectors by as much as 7.7 percent.

At a time in the industry when many moldmakers are busier than ever and reshoring efforts seem to be increasing, this is troublesome news. Here are some other key findings:

  • --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 impact on jobs would be substantial, with a loss of worker income equivalent to between 1.3 million and 1.5 million jobs in 2013 and between 3.8 million and 21 million by 2053.
  • --Any revenue raised from the carbon tax would be far outweighed by the negative effects on the economy.
  • --A carbon tax would have a negative effect on consumption, investment and jobs, resulting in lower federal revenue from taxes on capital and labor.
  • --The increased costs of coal, natural gas and petroleum products due to a carbon tax would ripple throughout the economy, resulting in higher production costs and less spending on non-energy goods.

Furthermore, this study looks at two carbon tax scenarios: one levied at $20 per ton increasing at 4 percent and the other designed to reduce carbon dioxide (CO2) emissions by 80 percent. Both cases would have a negative impact on the economy. Please click on the links for the executive summary and full report and for information on 10 hard hit states.


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