Net-zero by 2050: The most expensive federal program ever
is pushing ahead with his plan to eliminate almost all emissions of greenhouse gases (primarily carbon dioxide) by 2050. As part of that net-zero plan, the Environmental Protection Agency intends to propose dramatic reductions in greenhouse gas emissions from
coal- and gas-fired electric power plants
This is only the latest phase of Biden’s plan. Last month, the EPA announced new
emission standards for cars and light trucks
that would essentially force consumers to buy expensive and unreliable electric vehicles instead of vehicles with proven internal combustion engines that better serve their needs. And last year, the Securities and Exchange Commission proposed making publicly traded companies
enact net-zero as their overriding corporate purpose
NUCLEAR ENERGY IS POPULAR. SO WHY IS REGULATION GETTING IN ITS WAY?
Yet the president, his regulators, and his activist allies rarely mention how much net-zero will cost households.
This is an important question, though one that’s difficult to answer with great precision. Still, we can approximate net-zero’s lowest possible average household-level cost and thereby put the public on notice.
The least expensive way to achieve net-zero is through a carbon tax: a fee charged for every ton of (mostly) carbon dioxide emitted. Congress has had decades to enact such a tax but has never done so. Maybe politicians are smarter than they appear on TV. That is, they have the intuition that this would be very expensive, and, more importantly, that makes them conclude that enacting a carbon tax would be political suicide.
To become at least as smart as our politicians, we can easily calculate the minimum cost of net-zero to households. We tally up all the carbon dioxide emitted, multiply that by the minimum tax necessary, and then divide the total by the number of U.S. households. Contrary to popular myth, corporations cannot be compelled to pay these costs. They will pass costs to customers, employees, suppliers, and shareholders — which means households.
According to the Energy Information Administration, 4.9 billion metric tons of carbon dioxide were emitted via the production and use of U.S. carbon-based energy in 2021, the latest year for which data are available. (Other sources of greenhouse gases are not included, so actual emissions are considerably higher).
Federal regulators use the “social cost of carbon” as a proxy for a carbon tax in their regulatory analyses. The lowest rate that plausibly could achieve net-zero by 2050 is $100 per metric ton (2,205 pounds). Respected organizations say rates as high as $700 per metric ton likely would be required. Taxing every metric ton at these rates means collecting between $490 billion and $3.4 trillion in carbon taxes from households. Every year.
There are 122 million households in the United States, so the average cost for each household of a $100 per metric ton tax is about $4,200. That means $12,700 per household at $300 per metric ton and $30,000 per year at $700 per metric ton. These figures equal 6.5%, 20%, and 45% of median U.S. household income. Every year.
Annual tax payments would go down as households consumed less carbon-based energy. But tax bills would decline slowly because it would take many years of expensive sacrifices to reduce a household’s carbon footprint seriously. All but the richest households would have to reduce their standard of living dramatically. As difficult as this would be for the middle class, how the poor would manage is inconceivable. It probably would require huge new transfer payments, raising the effective tax rate on the wealthy from 35% (what the top 20% of earners pay today) to maybe 70%. The wealthy can’t escape because they are the only ones with enough money to pay what the poor cannot.
Congress could offset carbon tax revenues with tax reductions elsewhere. Congress also could use these revenues to reduce federal government debt, which stands at over $31 trillion. At $490 billion per year, it would take only 63 years to pay it off. That assumes, of course, that Congress never again increases the debt limit, which the public is told every day must be done to avoid economic catastrophe.
More likely, Congress and the president would find ways to spend the $490 billion, if not more, every year. And nothing short of a constitutional amendment could force Congress to permanently reduce other taxes or retire debt by an equivalent amount.
Without a carbon tax, net-zero advocates, including Biden, are left to rely on grossly inefficient regulatory authority provided in statutes such as the Clean Air Act, which was enacted to reduce air pollution, not climate change. So it’s certain that everything the administration does will cost households much more than the dollar amounts calculated here.
The president and other net-zero advocates say we need to act now to protect future generations from the ravages of climate change. But they should be honest about how much this will cost households. Hiding the cost in bureaucratic word salad, or promising them that costs will plummet because of magic technological innovations, is just disinformation.
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Richard Belzer is an independent consultant in regulation, risk, economics, and information quality.
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