Minneapolis imposing $5/ton of carbon tax
Minneapolis Mayor Jacob Frey signed into law a $5 per ton carbon dioxide tax yesterday. The Mayor’s office claims that the move “will significantly cut pollution, save money, and move Minneapolis closer to achieving its ambitious climate goals.”
The new fee structure will take effect on January 1, 2026. The program apparently “creates financial incentives for large facilities to lower their carbon footprint.” For most people, an “incentive” implies a carrot, not a stick.
The City Council had originally planned a $452 per ton carbon-dioxide equivalent tax on the “36 biggest emitters” in the city. Frey vetoed the tax in October 2024, but the City Council overrode his veto 9-2. Frey cited in his veto that the “Council ignored legal advice publicly provided by the City Attorney” that indicated that the plan would “likely constitute an unauthorized tax,” given that municipal regulatory fees “must be roughly commensurate with the City’s direct and indirect costs” of the activity.
After the override, the fee’s enforcement deadline was pushed to July 1, 2025, and the Council ordered a cost study to determine a fee that wouldn’t be flatly illegal. The Mayor’s newsletter now says that “Because the administration waited for the completion of the cost study, no one was charged the inflated fee, saving local schools, hospitals, and businesses across Minneapolis from unnecessary costs.”
It’s bad form to take a victory lap that things weren’t 100 times worse for businesses while still imposing a tax. Energy-intensive facilities weigh regulatory burdens, no matter how seemingly “necessary” to the City, when deciding whether to expand in Minneapolis or invest elsewhere.
There’s also room for significant doubt that a new regulatory program will “save money.” The original report in 2024 recommending the $452/ton fee estimates the program would require at least one full-time equivalent (FTE) staff member to “conduct site visits to the large facilities,” which would cost $180,000. The total cost of “staffing, administration, enforcement, and mitigation” was estimated to be $453,826.
Even the ludicrous $452/ton fee was expected by city planners to cause only a six percent decrease in CO2 emissions from Minneapolis’ 36 largest emitters. It’s hard to see how a much smaller fee — only 1.1 percent of the proposal — would result in “significantly” cutting carbon dioxide. Even if Minneapolis were to squeeze out that six percent decrease in CO2 emissions, Minneapolis accounts for a vanishingly small fraction of global emissions.
Minneapolis’ carbon tax scheme is simply the latest installment in the saga of driving away business and wasting taxpayer dollars.