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|Tuesday, April 02, 2013|
BY DR. THOMAS POTIOWSKY, DR. JENNY LIU, AND JEFF RENRO | OP-ED CONTRIBUTORS
Our lives are surrounded by regulations to influence behavior, from not smoking in public places to not polluting waterways and being civil in public. Usually, a violation of these regulations is associated with a fine or a tax to discourage greater use, as in the cigarette tax.
The fines and taxes serve two purposes: 1) to discourage an unwanted behavior and 2) to generate revenue that funds the operation of public services, such as police and fire departments.
In a very broad sense, our society fines and taxes undesirable behavior and uses the funds to promote behavior we do want, such as safety on our streets and fire prevention for our homes.
When it comes to climate change, we also have a number of regulations to stop or discourage behavior that may lead to global warming. Violations of these regulations have fines associated with them. However, unlike the cigarette tax, there is no price or cost placed on emitting carbon. Furthermore, we are missing the second part of using the funds to promote behavior we do want.
A properly designed carbon tax can get us there.
In March 2013, we released our report Carbon Tax and Shift: How to Make it Work for Oregon’s Economy which models one way of reducing carbon emissions while also assisting businesses and households by reducing distortionary income taxes and potentially generating revenue for the state.
In 2008, British Columbia instituted a revenue-neutral carbon tax of $10/ton CO2e which has risen to its current cap of $30/ton CO2e. Results of the tax are still preliminary, but evidence suggests that BC has reduced emissions more than the rest of Canada while enjoying slightly higher GDP growth than the other provinces.
The revenue has been repatriated back into the economy primarily through cuts to corporate and personal income tax rates. As a result, BC now has the lowest corporate income tax rate in the OECD. In our review of carbon pricing schemes, BC stood out for the ease with which its program was implemented as well as the environmental benefits without negatively impacted the larger economy.
We estimated the net economic and environmental impacts of bringing this system to Oregon. While our research is preliminary, we find that there is a way to decrease CO2e emissions in Oregon while having a small, positive effect on Oregon employment. Our study models several different carbon prices, but we decided to use a price of $60/ton CO2e in our full scenario estimates.
When deciding how to repatriate carbon tax revenues, there is a tradeoff between equity and efficiency. A successful program will need to distribute the burden of the tax fairly, while also preventing adverse economic effects. During our simulations, we found that corporate income tax cuts are key for economic efficiency. If all of the revenue is devoted to corporate income tax cuts, the Oregon economy has the largest employment growth but fails to produce equitable outcomes. Because low-income households spend more of their income on energy, measures must be put in place to reduce the regressiveness of the tax.
Exempting low-income households would severely weaken the carbon price signal; instead, we suggest returning funds to low-income households either quarterly or annually through a greater decrease in the income tax rate, tax credits or subsidies. In addition to being ethically justified, giving extra relief to low-income households also leads to greater economic growth.
After running dozens of scenarios, we arrive at two preferred repatriation schemes. Both devote a majority of revenues to corporate income tax cuts, and include low-income household relief to ensure equitable outcomes. They differ in the amount of revenue set aside for targeted reinvestment. In one scenario, 10% of revenues are set aside for industrial energy efficiency projects. In the other 25% of revenues are used for industrial and residential energy efficiency, as well as transportation infrastructure. The outcomes differ in the amount of jobs created, as well as the distribution of the tax burden. In all of our scenarios, we find net changes in employment that corresponds to a fraction of 1% of Oregon employment.
We still have work left to do before a carbon tax could be implemented. Impacts on industry sectors and households need to be estimated in finer detail. A method for applying carbon pricing to imported electricity that is both economically valid and legally viable needs to be devised.
Between the experience in BC and the results of our research, we can avoid the trade-off between doing what is right for the environment and what is right for the economy. It would be ideal if carbon pricing was adopted on a national or regional level, but it could be adopted locally.
There will be winners and losers in any scenario, but with carefully-designed repatriation methods we can reduce what we do not want — carbon emissions — while promoting want we do want – a healthy economy and job creation.
Thomas Potiowsky, Jenny Liu, and Jeff Renfro are researchers at Portland State University's Northwest Economic Research Center.
Friday, August 21, 2015
Renee Spears, founder and owner of Portland-based Rose City Mortgage, is hot to trot to sell pot.
Tuesday, August 18, 2015
BY JASON NORRIS | CFA
Earlier this month, the People’s Bank of China (PBoC) announced they were going to devalue their currency, the Renminbi. While the amount of the targeted change was to be roughly 2 percent, investors read a lot more into the move. The Renminbi had been gradually appreciating against the U.S. dollar (see chart) as to attempt to alleviate concerns of being labeled a currency manipulator.
Wednesday, August 19, 2015
BY GARY THILL | PHOTOS BY JASON E. KAPLAN
A storied institution climbs down from the ivory tower.
Wednesday, July 15, 2015
Oregon's roads are crumbling, and revenues from state and local gas taxes are not sufficient to pay for improvements. We asked readers if the private sector should help fund transportation maintenance and repairs. Research partner CFM Strategic Communications conducted the poll of 366 readers in February.
Friday, July 10, 2015
BY LINDA BAKER
Market of Choice is on a tear. In 2012 the 35-year-old Eugene-based grocery chain opened a central kitchen/distribution center in its hometown. The market opened a third Portland store in the Cedar Mill neighborhood this year; a Bend outpost broke ground in March. A fourth Portland location is slated for the inner southeast “LOCA” development, a mixed-use project featuring condos and retail. Revenues in 2014 were $175 million, a double-digit increase over 2013. CEO Rick Wright discusses growth, market trends and how he keeps new “foodie” grocery clerks happy.
Monday, July 13, 2015
BY KIM MOORE
Revenues in Oregon's private, for profit sector maintained solid growth as the economy continued to rebound.
Wednesday, August 05, 2015
BY KEN MAES
A huge migration from Northern California has contributed to average 16% growth per year since 1990.
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