Carbon tax profile for Minnesota (Amanda Alva)


1990
2007
% change 1990-2007
Fossil fuel CO2 emissions, in millions of metric tonnes[1]
79.47
99.86
+26%
Fossil fuel CO2 emissions, in millions of short tons[2]
87.6
110.07
+26%
Population, in millions[3]
4.4
5.19
+18%
Per capita CO2 emissions, in short tons
19.9
21.2
+.065%

Per capita emissions in Minnesota in 2007 hovered around the U.S. average, which was 21.0 short tons per capita.[4] On the one hand, Minnesota is a leading producer of ethanol and wind power, in addition to having nearly one-fourth of its electricity generated by nuclear power plants. Minnesota's per capita CO2 emissions remain on par with the rest of the country due to the need to heating homes during the cold winters (despite widespread use of natural gas) and because three-fifths of the state's electricity is produced in coal-fired power plants.[5]

A carbon tax of $30 per short ton of CO2 (about $0.30 per gallon of gasoline, or about $0.03 per kWh of coal-fired power) would have raised about $2.97 billion in 2007 (about $573 per person), assuming a 10% reduction in emissions.

For comparsion purposes, in Fiscal Year 2007 the state individual income tax generated about $7.2 billion and the state general sales and use tax generated about $4.4 billion. Together, these two taxes comprised nearly 68% of the $17.2 billion tax base.[6] A carbon tax of $30 per short ton of CO2 could (assuming a 10% reduction in emissions) have replaced 41% of the state income tax, or 67% of the state sales and use tax. Or, it could have nearly replaced the revenue generated by the next four highest tax revenues combined: the corporate franchise tax, state property tax, motor fuels excise tax, and motor vehicle sales tax. (Of course, replacing fuel- and vehicle-related taxes might be considered as working at cross-purposes.)

Minnesota is taking a number of related measures to reduce carbon emissions and increase energy efficiency. The state is currently working to reduce emissions under its Next Generation Energy Act of 2007. This legislation has led the state to be considered along with California as top states working to reduce greenhouse gas emissions. The goals established by this act include decreasing 2005 greenhouse gas emission levels by 15 percent by 2015, 30 percent by 2025, and 80 percent by 2050.[7] To achieve the first set of goals, the state will need to reduce emissions by approximately two million tons per year.[8]

Additionally, the state is one of 24 in the nation with a renewable portfolio standard, requiring that "electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date".[9] This standard also sets specific benchmarks for major providers, including Xcel Energy, which provides about 50% of Minnesota's electricity.[10]

Finally, Minnesota has developed a prominent ethanol industry due to its large agricultural sector. As a result, the state is one of only a few states that requires "statewide use of oxygenated motor gasoline blended with 10 percent ethanol." Minnesota also currently offers incentives to those who use or adopt the state-produced E85, a lower-emissions fuel blend of 85% ethanol and 15% motor gasoline.[11] Because of this industry's prominent position in the state economy, Minnesota may be more prone to offering ethanol-related tax credits than direct carbon taxes, or developing a proposal that shifts users away from carbon emissions but toward these ethanol products.

Interestingly, in the 1990s a group called the Institute for Local Self-Reliance proposed a $1.3 billion carbon tax shift that was never enacted into law. They proposed to reduce property and income taxes while instituting a tax on CO2 beginning at $10 per ton in the first year, up to $50 per ton by the fifth year.[12]
  1. ^ From EPA, “State CO2 Emissions from fossil fuel combustion, 1990-2007”, linked from here.
  2. ^ 1 metric tonne equals 1.1023 short tons.
  3. ^ 2007 population from the U.S. Census Bureau, http://www.census.gov/popest/states/NST-ann-est.html. 1990 population from U.S. Census Bureau, http://www.census.gov/popest/archives/1990s/ST-99-02.txt.
  4. ^ U.S. population of 295.6 million in 2005 from U.S. Census Bureau, http://www.census.gov/popest/states/NST-ann-est.html. U.S. carbon emissions of 6.317 billion tons of CO2 from EPA, http://www.epa.gov/climatechange/emissions/usgginventory.html.
  5. ^ Energy Information Administration (EIA) state profile, http://tonto.eia.doe.gov/state/state_energy_profiles.cfm?sid=MN#overview.
  6. ^ Minnesota Department of Revenue, Minnesota Tax Handbook report, http://www.taxes.state.mn.us/taxes/legal_policy/other_supporting_content/handbook_supplement_05.pdf. All amounts are net collections after refunds.
  7. ^ Next Generation Energy Act 2007 summary, Minnesota Sustainable Communities Network, http://www.nextstep.state.mn.us/res_detail.cfm?id=4034.
  8. ^ Minnesota Pollution Control Agency, progress report on Next Generation Energy Act, http://www.pca.state.mn.us/climatechange/ghg.html.
  9. ^ US Department of Energy, Energy Efficiency and Renewable Energy, http://apps1.eere.energy.gov/states/maps/renewable_portfolio_states.cfm.
  10. ^ Energy Information Administration (EIA) state profile, http://tonto.eia.doe.gov/state/state_energy_profiles.cfm?sid=MN#overview.
  11. ^ Energy Information Administration (EIA) state profile, http://tonto.eia.doe.gov/state/state_energy_profiles.cfm?sid=MN#overview.
  12. ^ Institute for Local Self-Reliance, http://www.newrules.org/energy/ilsrs-minnesota-carbon-tax-shift-archives and proposed dollar amounts from this version of the bill, http://www.newrules.org/sites/newrules.org/files/billsummary.pdf.