March 11, 2009
Laura Henderson (202) 621-2951

WASHINGTON, D.C. – As our federal lawmakers continue to lay the groundwork to regulate and tax carbon, Institute for Energy Research (IER) today released two studies that analyze the economic impact that two of these proposals would have: the carbon tax and the so-called “Carbon Fed.” Though they differ in degree and detail, both programs would further extend the government’s role in Americans’ lives and increase taxes and energy costs—though the benefits of these policies remain unclear. 

“Americans know that the government’s heavy-handed attempts to tax, regulate, and commoditize carbon will kill jobs, decrease our ability to use our domestic energy resources, and prolong our current economic downturn,” said IER President Thomas J. Pyle.” 

“Policymakers should use the traditional legislative process—which would produce a straightforward plan that is honest about both the cost and the returns—to achieve these ends.  Unfortunately, the carbon tax and Carbon Fed are reflective of a backdoor strategy that provides little transparency to the public, not to mention that both would have potentially disastrous effects on our economy.”

Carbon Tax Background:

Carbon taxes’ supporters have grown in number as the debate over cap and trade continues.  Carbon Taxes: Reducing Economic Growth–Achieving No Environmental Impact explains that though economists favor carbon taxes, lawmakers hesitate, as taxpayers will not support a large, visible tax increase. The carbon tax, for which supporters’ best argument is that it’s better than cap and trade, would not only significantly increase Americans’ tax burdens, but would prove ineffective in its goal to reduce global carbon dioxide emissions.   

Carbon Fed Background:

Our current financial troubles clearly demonstrate that even well-intended financial regulatory bodies, such as the Federal Reserve, have the capacity to make mistakes that harm our economy. The Dangers of a "Carbon Fed" examines recent proposals to create a powerful body to control the way we access, use, and pay for our energy, as well as the likely outcomes of such plans. The financial sector’s recent performance shows that complex financial instruments with little intrinsic value, such as carbon permits, are susceptible to manipulation and game-playing that can lead to terrible results.

More from IER on the current trends in energy policy:

· Blog Posting: Low Carbon Fuel Standards: Recipes for Higher Gas Prices & More Foreign Oil

· Press Release: Administration Attempts to Sneak Biggest Tax Increase in History into Budget

· IER Study: Green Jobs: Fact or Fiction?

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.


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