Impact of Carbon Price Policies on U.S. Industry

97 Pages Posted: 26 Dec 2008 Last revised: 26 May 2014

See all articles by Mun S. Ho

Mun S. Ho

Resources for the Future

Richard D. Morgenstern

Resources for the Future

Jhih-Shyang Shih

Resources for the Future

Date Written: November 2008

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

JEL Classification: F14, D 21, D57, D58, H23

Suggested Citation

Ho, Mun S. and Morgenstern, Richard D. and Shih, Jhih-Shyang, Impact of Carbon Price Policies on U.S. Industry (November 2008). RFF Discussion Paper No. 08-37, Available at SSRN: https://ssrn.com/abstract=1320201 or http://dx.doi.org/10.2139/ssrn.1320201

Mun S. Ho

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
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Richard D. Morgenstern (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Jhih-Shyang Shih

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5028 (Phone)

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