Executive Summary Despite the controversy over the existence, magnitude, and causes of the reputed global warming, a number of proposals have been advanced in both the world and national communities to stabilize, and subsequently reduce, the levels of carbon dioxide and other greenhouse gases. A study undertaken by CONSAD Research Corporation, and documented in this report, estimates the impacts on employment from policies designed to discourage carbon use policies such as a carbon tax (specifically analyzed in this study), or equivalent alternatives which would have similar impacts. More specifically, the study identifies a variety of short-term and longer-term effects of such policies on employment by state and identifies those industries where the jobs are likely to be. These impacts represent a range of consequences, including job losses, lower wages, underemployment, and diminished job security. Based on the relative use of carbon-based fuels, and the interdependence and financial status of industries in this country, this report reaches the following conclusions regarding the economic impacts of a carbon tax, or an equivalent policy to reduce carbon use: 1. Job losses will be substantial: 2. a. b. C. In the short run, the first 3 to 5 years, resulting job losses will range from 240,000 to 360,000, and will be accompanied by adverse economic conditions, including high inflation, resembling the energy price shocks of the 1970s. By the year 2000, the decrease in employment in that year could reach 600,000 or higher, depending on the magnitude of the carbon tax, or other similar costs associated with carbon use and co2 emissions. In the longer run beyond the year 2000 job The jobs of nearly five million workers employed in vulnerable industries are at risk during the first several years. In addition to an increase in the jobless, substantial numbers of other workers will experience tangible adverse changes in their terms of employment: reductions in wages and hours worked, increased frequency and duration of layoffs, and diminished prospects for job growth. Almost 30 percent of these workers are in those industries most likely to 1 3. 4. experience the most severe declines in employment in both the short-term and the intermediate-term. Job consequences will vary among states and industries: a. b. Since about 90 percent of the nation's energy use is carbon-based (coal, natural gas, gasoline, etc.), the job losses and cost increases from a carbon tax or equivalent policy will be pervasive. States most likely to experience the largest declines in employment are: California, Illinois, Ohio, Pennsylvania, and Texas, and to a slightly lesser degree, Indiana, Kentucky, Louisiana, Michigan, New York, and West Virginia (see Figure 1 and maps following). Industries with less than five percent of the Alternatives to a carbon tax could have greater adverse effects on employment. Policies such as "command-andcontrol," "technological fixes," or enforced "voluntary" time tables, could well cause at least as much job loss and jobs-at-risk as would occur with an equivalent carbon tax. 5. Job losses will occur regardless of the way tax receipts are used. Policies to recycle revenue from carbon taxes have not been designed to reduce the negative employment impacts. Moreover, it is not likely that such policies could easily be developed and implemented. If tax receipts are used to finance reductions in corporate tax burdens in ways that encourage labor use and capital investment, job losses may be less severe. However, changes in corporate tax structures are unlikely to be sufficiently targeted and large enough to alleviate the projected job losses. 6. Some jobs will be created, but the number will be meager compared with the losses, and they will be in different professions. While substantial job losses will occur among "blue collar" manufacturing workers, the relatively small number of job gainers will principally be 7. scientists, engineers, and skilled technicians involved in technology development. Retraining will not provide the job losers with the skills required for the emerging jobs, and adjustments in the labor market will be a complex long-term process. Investment capability will be lower in industries hardest hit. Another sizable, real cost is the reduced capacity to invest which industries hit hard by the carbon tax will experience. Industries most in need of capital funds for restructuring and technological change will be most hard put to make such investments. In conclusion, from an economic standpoint, a carbon tax - or any other policy to reduce carbon use that compels industry to radically and prematurely restructure its way of doing business would impose enormously expensive and hidden costs on the economy. Much of this will be borne by an unsuspecting labor force. Even if the scientific evidence of the alleged benefits were conclusive, the unavoidable social, physical, and emotional pain and suffering that would inevitably accompany such policies are unintended consequences that should eliminate such policies from serious consideration. more |