The near-term impacts of carbon mitigation policies on manufacturing industries

Who pays for new policies to reduce carbon dioxide and other greenhouse gas emissions in the United States? This paper considers a slice of the question by examining the near-term impact on domestic manufacturing industries of both upstream (economy-wide) and downstream (electric power industry only) carbon mitigation policies. Detailed Census data on the electricity use of four-digit manufacturing industries are combined with input–output information on inter-industry purchases to paint a detailed picture of carbon use, including effects on final demand. Regional information on electricity supply and use by region is also incorporated. A relatively simple model is developed which yields estimates of the relative burdens within the manufacturing sector of alternative carbon policies. Overall, the principal conclusion is that within the manufacturing sector (which by definition excludes coal production and electricity generation), only a small number of industries would bear a disproportionate short-term burden of a carbon tax or similar policy. Not surprisingly, an electricity-only policy affects very different manufacturing industries than an economy-wide carbon tax.