Impact of Carbon Price Policies on U.S. Industry

Mun Sing Ho (), Richard Morgenstern () and Jhih-Shyang Shih ()
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Richard Morgenstern: Resources for the Future

Discussion Papers from Resources For the Future

Abstract: This paper informs the discussion of carbon price policies by examining the potential for adverse impacts on domestic industries, with a focus on detailed sector-level analysis. The assumed policy scenario involves a unilateral economy-wide $10/ton CO2 charge without accompanying border tax adjustments or other complementary policies. Four modeling approaches are developed as a proxy for the different time horizons over which firms can pass through added costs, change input mix, adopt new technologies, and reallocate capital. Overall, we find that a readily identifiable set of industries experience particularly adverse impacts as measured by reduced output and that the relative burdens on different industries are remarkably consistent across the four time horizons. Output rebounds considerably over longer time horizons, and the adverse impacts on profits diminish even more rapidly in most cases. Over the short term employment losses mirror output declines, while gains in other industries fully offset the losses over the longer horizons. At the same time, leakage abroad is considerable in some sectors, particularly when reductions in exports are considered.

Keywords: carbon price; competitiveness; input-output analysis (search for similar items in EconPapers)
JEL-codes: F14 D D57 D58 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2008-12-15
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