Carbon tax profile for North Carolina (Previous version by ???. 2005)



1990
2005
% change 1990-2005
Fossil fuel CO2 emissions in millions of metric tons [1]
111
153
+ 37.6
In millions of short tons [2]
123
169
+ 37.6
Population in millions [3]
6.6
8.7
+ 30.9
Per capita CO2 emissions in short tons
18.5
19.5
+ 5.1

Per capita emissions in North Carolina in 2005 were lower than the U.S. average, which was 21.4 short tons per capita [4]. Coal-fired power plants typically account for about three-fifths of North Carolina’s electricity generation, and the state’s electricity consumption is among the highest in the nation. [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 $4.05 billion in 2005 (about $467 per person), assuming a 20% reduction in emissions.

For comparison purposes, in 2005 the state income tax generated about $8.2 billion, the state corporate income tax generated about $1.1 billion, and the state sales and use tax generated about $4.6 billion [6]. So a carbon tax of $30 per short ton of CO2 could (assuming a 20% reduction in emissions) have replaced about half (49%) of the state income tax or could have replaced 380% of the state corporate income tax or could have replaced 88% of the state sales and use tax.
Tax Type
Amount Collected *dollars in thousands
(% of Total 2005 Revenue)

% Covered by hypothetical carbon tax
Individual Income
8,206,026 (53%)
62%
Corporate Income
1,065,374 (7%)
380%
Sales and use
4,587,542 (30%)
88%
Franchise
613,093 (4%)
Total of all other than income, corporate and sales:
$1,581,335... carbon tax would cover 256%
Beverage
220,782
Insurance
431,684 (3%)
Piped natural gas
60,739
Intangible
--
Inheritance
134,419
Soft drink

Tobacco products
43,361
License
44,219
Real estate conveyance

Gift
18,924
Other (includes:
Highway Use Tax,
Motor Fuel Tax,
Occupancy Tax,
*White Goods Disposal Tax,
Scrap Tire Disposal Tax, and
Dry-Cleaning Solvent Tax*)
14,114
TOTAL TAX REVENUES
15,440,257



A Closer Look at Taxing ‘Bads’ (or making pollution expensive)
In a 1997 edition of An Introduction to Ecological Economics, (1) the authors discuss the growing need for ecological tax reform, which shifts “much of the tax burden away from ‘goods’ like income and labor and toward ‘bads’ like ecological damages and consumption of nonrenewable resources” as a way to support the “three major goals of tax policy (sustainable scale, efficient allocation, and just distribution).” Much more has been written about this in the past twelve years. One of twelve states with a perchloroethylene clean-up program, North Carolina collects a dry-cleaning solvent tax to fund a trust fund for clean-up of dry-cleaning solvent contaminated property and “to protect human health and the environment by preventing future releases from these facilities.” (2) The tax, $10 for each gallon that is halogenated hydrocarbon-based and $1.35 for each gallon that is hydrocarbon-based, is imposed on each gallon of dry-cleaning solvent sold by a retailer to a dry-cleaning facility or purchased by a dry-cleaning facility from outside North Carolina for storage, use, or consumption in North Carolina. This is an example of a per-unit tax on the seller, which creates an incentive for each perc producer to curtain pollution, because the perc retailer saves the amount of the tax per unit of perc not sold [emitted]. If reducing pollution by one unit costs the retailer less than the tax, the retailer has an incentive to engage in pollution abatement.
As noted in The Cartoon Introduction to Economics, the legal incidence of this tax falls on the seller, but the economic incidence is determined by supply and demand. With the imposition of the tax, we would expect to see supply of “perc” solvents decrease over the long term, shifting the supply curve to the left.
The per gallon tax on solvent retailers has raised $4 million since 1998, and an additional funding mechanism was established in 2000 when the North Carolina General Assembly voted to divert revenue from an existing 4% sales tax on dry-cleaning services to the trust fund. In the current legislative session, there is a bill to extend the sunset on dry-cleaning solvent taxes. (3)



----
[1] EPA, “State CO2 Emissions from fossil fuel combustion, 1990-2005”, linked from http://www.epa.gov/climatechange/emissions/state_energyco2inv.html.

[2] Use Google to figure out how to convert metric tons to short tons.

[3] 1990 population from U.S. Census Bureau, http://www.census.gov/popest/archives/1990s/ST-99-02.txt. 2005 figure from:

Triangle Business Journal. 2005. N.C. population growth fifth fastest in U.S. December 23.

(accessed November 22, 2009).



[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] See state profiles from the EIA, http://tonto.eia.doe.gov/state/index.cfm.

[6] You’ll need to use Google to find tax or budget information for your state. The Washington State figures come from Washington State Office of Financial Management, http://www.ofm.wa.gov/budget07/summary/table01.pdf.

carbon emissions




[[#_ftnref|[1]]1 Costanza, Cumberland, Daly, Goodland, and Richard Norgaard. 1997. An Introduction to Ecological Economics. Boca Raton, FL: St. Lucie Press.

[[#_ftnref|[2]]2 Superfund Section, Division of Waste Management, North Carolina Department of Environment and Natural Resources, Annual Report to the Environmental Review Commission, North Carolina General Assembly:
The Dry-Cleaning Solvent Cleanup Act Program, October 2008

[[#_ftnref|[3]]3 Triangle Business Journal. 2002. N.C. prepares for an $80m cleanup plan. October 25.

(accessed November 23, 2009).