The Northwest Economic Research Center at Portland State has released an extended study on the effects of a hypothetical tax on carbon emissions on the Oregon economy. Using an elaborate model, the research demonstrated little to no effect on the economy as a result of a carbon tax.
“The way that we thought about it is that it’s an additional tax on fossil fuel purchases based on the carbon content of the fossil fuel. When you go to the gas station, you pay a little bit extra for your gas; when you pay your electricity bill, you pay a little bit extra for your electricity,” said Jeff Renfro, the senior economist at NERC. “So the idea is to incorporate the true cost of carbon emissions and to make people make decisions based on that true cost.”
The effects of a carbon tax in Oregon were projected using a model developed by Dr. Andrew Rice, a physics professor at PSU, and Dr. Christopher Butenhoff that compares varying tax values to resulting carbon emissions.
“One of the goals is to see how carbon tax imposed on fossil fuels. We really focused on fossil fuel emissions in the study, [carbon dioxide] in particular, and how it was affected by a carbon tax. If you apply a tax, it changes the fuel price, it changes demand,” Rice said. “We translated those changes in fuel purchases into changes in greenhouse gas emissions.”
Dr. Jenny Liu, assistant director at NERC, said in an email that researchers were able to incorporate sophisticated modeling, scenarios and details in the study. They talked to many advisory groups in the process.
“I think the breadth and depth of the new study helps to answer many questions about the carbon tax and the use of the revenues that many people posed,” Liu said.
Oregon Legislature commissioned the study last year, after NERC released a 2013 report, “Carbon Tax and Shift: how to make it work for Oregon’s economy” with good feedback. That report studied the projected effects a carbon tax similar to the one in British Columbia would have on carbon emissions and the economy.
“We started looking at a state-level carbon tax for Oregon in our first research report published in 2013 when many people started noticing the successful outcomes of the British Columbia carbon tax that started in 2008,” Liu said.
“Even if the other states around us don’t do anything similar, we find that in Oregon you can have a significant reduction in emissions while basically holding the economy harmless,” Renfro said.
If carbon is taxed steeply, the funds can be redistributed into the Oregon economy—in other tax cuts, for example. “Emissions and revenue weren’t that sensitive to the type of repatriation method used. It’s good that it’s robust in that way,” Rice said.
Liu said the NERC research team hopes the study will be helpful for the public. “The research team at NERC hopes that this in-depth study will provide citizen, policy makers and other stakeholders with unbiased information and analyses on what happens to both the environment and the economy here in Oregon,” Liu said.
One projected goal is to reduce carbon emission levels 10 percent below those in the 1990s. Rice explained that this model showed the target reduction at around $60 per metric ton of carbon emissions.
“If Oregon were to put in a carbon tax or some sort of carbon-trading scheme into place, I think it would be with other western states like Washington or California,” Rice said.
“We took a lot of care in our study to think about how to best implement carbon pricing,” Renfro said. As Oregon moves ahead, he said, the state should make sure its policies harmonize with those in California and Washington.
Response to the study’s findings has been positive. “From our perspective, the response was really good because people were really interested in it,” Renfro said. “For us, our mission is to raise the level of discourse on certain issues. So if carbon pricing is going to be an important issue in Oregon over the next few years, we’re happy that we’ve contributed to this conversation.”
Liu cited a recent survey about Portlanders’ attitudes toward a possible carbon tax. She said that the majority, it seems, are in favor of a measure meant to reduce carbon emissions. “After all, Oregonians are pioneers and trailblazers in many ways, and taking the lead on pricing carbon for climate change mitigation doesn’t seem out of the question.”
