{"id":23450,"date":"2021-03-03T19:52:27","date_gmt":"2021-03-04T00:52:27","guid":{"rendered":"http:\/\/www.realclimate.org\/?p=23450"},"modified":"2021-03-03T19:52:30","modified_gmt":"2021-03-04T00:52:30","slug":"looking-for-help-with-an-electricity-tax-swap-idea","status":"publish","type":"post","link":"https:\/\/www.realclimate.org\/index.php\/archives\/2021\/03\/looking-for-help-with-an-electricity-tax-swap-idea\/","title":{"rendered":"Looking for help with an electricity tax-swap idea"},"content":{"rendered":"
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Guest commentary from Yoram Bauman<\/a><\/em><\/p>\n\n\n\n

Everyone from Treasury Secretary Janet Yellen<\/a> to Elon Musk<\/a> thinks that putting a price on carbon is an important step in tackling climate change. Politically, however, carbon taxes and cap-and-trade systems face an uphill battle, in part because they could drive up the prices of household basics like gasoline and electricity. There are many worthy proposals for addressing this concern, mostly focused on the idea of using carbon pricing revenue to pay for things like per-capita dividends, green investments, or reductions in payroll taxes. <\/p>\n\n\n\n

But what if you could put a price on carbon without<\/em> driving up consumer prices? In California, for example, the impact of the cap-and-trade system on residential electric bills is reduced substantially by the semi-annual Climate Credits<\/a> that households receive on their bills. <\/p>\n\n\n\n\n\n\n\n

\"\"<\/figure>\n\n\n\n

The purpose of this post is to invite feedback on and ask for help with an even more direct way to do this that might work in about 20 states, some cities, and perhaps in other countries as well. The gist is that many jurisdictions impose taxes on electricity consumption\u2014sales taxes, gross receipts taxes, value-added taxes\u2014and that replacing these existing taxes on electricity with a carbon tax on fossil-fuel generated electricity can come close to delivering a carbon tax \u201cfor free\u201d. <\/p>\n\n\n\n

Table 1 shows some preliminary numbers for 18 states (and two municipalities, New York City and Washington, DC) that have significant taxes on residential electricity. The table shows that in Alabama (for example) the existing 4% state sales tax on electricity is the rough equivalent of a $12 carbon tax on electricity. By \u201crough equivalent\u201d I mean that in 2019 those two taxes would have generated about the same amount of state revenue and so would have had roughly the same impact on consumer prices. <\/p>\n\n\n\n

Alabama<\/strong><\/td>4.0%<\/td>$12<\/td><\/td>Michigan<\/strong><\/td>4.0%<\/td>$10<\/td><\/td>NY State<\/a><\/strong><\/td>2.0%<\/td>$19<\/td><\/tr>
Arizona<\/a><\/strong><\/td>5.6%<\/td>$12<\/td><\/td>Minnesota<\/a><\/strong><\/td>6.875%<\/td>$15<\/td><\/td>North Carolina<\/strong><\/td>7.0%<\/td>$19<\/td><\/tr>
Arkansas<\/strong><\/td>6.5%<\/td>$10<\/td><\/td>Nebraska<\/a><\/strong><\/td>5.5%<\/td>$9<\/td><\/td>Pennsylvania<\/strong><\/td>5.9%<\/td>$19<\/td><\/tr>
Florida<\/strong><\/td>2.56%<\/td>$6<\/td><\/td>New Jersey<\/strong><\/td>6.625%<\/td>$36<\/td><\/td>Rhode Island<\/strong><\/td>4.0%<\/td>$18<\/td><\/tr>
Georgia<\/a><\/strong><\/td>4.0%<\/td>$12<\/td><\/td>New Mexico<\/a><\/strong><\/td>5.125%<\/td>$11<\/td><\/td>South Dakota<\/a><\/strong><\/td>4.5%<\/td>$8<\/td><\/tr>
Illinois<\/strong><\/td>$0.33<\/td>$9<\/td><\/td>NYC (sales)<\/a><\/strong><\/td>4.5%<\/td>$31<\/td><\/td>Washington DC<\/strong><\/td>$0.70<\/td>$13<\/td><\/tr>
Indiana<\/strong><\/td>7.0%<\/td>$10<\/td><\/td>NYC (util.)<\/a><\/strong><\/td>2.35%<\/td>$16<\/td><\/td>Wisconsin<\/a><\/strong><\/td>5.0%<\/td>$10<\/td><\/tr><\/tbody><\/table>
Table 1: Jurisdiction, tax on residential electricity, carbon tax replacement rate.  <\/em>Here are general <\/em>data<\/a> sources<\/a>, with additional details on some states linked below.<\/em><\/figcaption><\/figure>\n\n\n\n

Details and Caveats<\/strong><\/p>\n\n\n\n