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No state has enacted such a tax; economists say details vital for industry, low-income people.



A state tax could reduce carbon emissions within a few years without significant job or economic losses in Oregon, lawmakers were told Monday.

But the final report from the Northwest Economic Research Center says such a tax requires attention to details to lessen negative economic effects, particularly on low-income families and affected industries.

“We’ve shown you that the economic effects are small relative to the broader economy,” says Tom Potiowsky, director of the center based at Portland State University and a former state economist.

“But you also need to take a look at the different regions, income groups and industries which will have different impacts based on the carbon tax that is set.”

The report was presented to members of the House and Senate revenue committees and the Senate Environment and Natural Resources Committee.

A carbon tax is seen as a market-based alternative to cap-and-trade systems that are being implemented in California and Northeastern states. California’s system is just under two years old.

No state has yet implemented such a tax, but the way to such taxes is left open by proposed federal rules that aim at reducing carbon emissions from power generation by 30 percent from 2005 levels by a 2030 deadline. Different targets apply in the states.

Such a tax would be levied on gasoline and other fossil fuels — coal, natural gas and oil — whose burning create greenhouse gases.

The tax would be equivalent to 1 cent per gallon of gasoline for every $1 per metric ton of carbon dioxide.

At $30 per metric ton of carbon dioxide — the current tax in the Canadian province of British Columbia — the report concludes that such a tax would achieve Oregon’s 2020 goal of reducing carbon emissions by 10 percent from 1990 levels.

The British Columbia tax has resulted in a 16 percent reduction.

Oregon’s long-term goal is a 75 percent reduction from 1990 levels by 2050, although the report concludes that even a $150-per-ton tax would not achieve that level by itself, and that other steps would be required.

Follow-up study

The report follows up a study that the center presented to lawmakers in 2013, when they approved spending for the current report. It analyzes the economic effects of carbon taxes ranging from $10 per ton — the initial level set in British Columbia back in 2008 — to $150 per ton.

Several of those proposals envision a phased-in tax at $5 to $10 per ton per year.

The report also analyzes a range of choices for estimated proceeds from the tax, which would raise from $490 million to $4.55 billion annually. The choices range from a direct dividend to taxpayers to reductions in personal and corporate income taxes, or targeted spending to help offset negative effects on low-income people and affected industries.

A $60-per-ton tax would raise $2.3 billion.

The report estimates that households would bear about 35 percent of the burden of such a tax, with the other 65 percent split almost equally between commercial and industrial sectors.

While the report projects that a carbon tax might result in slower job growth, Potiowsky says, “the point is there are fairly narrow impacts with regard to jobs.”

Those effects, however, are most likely to be felt in the three counties of the Portland metropolitan area, which the report says account for slightly more than 60 percent of Oregon’s carbon emissions.

Statewide, the report says a carbon tax would have more negative effects on wholesale and retail trade, and food services, and less on other economic sectors.

The report was put together by Potiowsky, assistant director Jenny Liu and senior economist Jeff Renfro. Two PSU physicists, Christopher Butenhoff and Andrew Rice, assisted with creating the model of how carbon emissions would be reduced through the new pricing plan.

What's next?

What action lawmakers may take toward a carbon tax is uncertain at the point.

Lawmakers are expected to take up a measure to remove the 2015 expiration date on Oregon’s standard for low-carbon fuel.

Gov. John Kitzhaber says that with California enacting such a standard, and Washington able to adopt one through administrative action, “you could have a market for low-carbon fuel. That is a logical first step.”

The U.S. Supreme Court declined on June 30 to review California’s standard, which was upheld by the 9th U.S. Circuit Court of Appeals.

Kitzhaber says he has not heard of any legislative leader seeking to make a carbon tax a priority in next year’s session, which starts Jan. 12.

“If Oregon gets to the point where we explicitly try to put a price on carbon, it has to be done in conjunction with California and Washington as part of a regional strategy,” he says. “I doubt you can have an effective market with a state of less than 4 million people.”

But Rep. Phil Barnhart, a Democrat from Eugene who leads the House Revenue Committee, says the report has value beyond the specific effects of a potential carbon tax.

“I see applications of this report go beyond whether we do a carbon tax or not,” Barnhart says. “It helps us understand how the economy works.”

Link to the full report:

www.pdx.edu/nerc/projects

This email address is being protected from spambots. You need JavaScript enabled to view it.

(503) 385-4899

twitter.com/capitolwong


Adds comment by Gov. Kitzhaber after lawmakers heard the report Monday. A previous story carried his comment prior to Monday's presentation.

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