Carbon taxes: good for economy, effective at reducing carbon

July 17, 2018

Designed the right way, a carbon tax can reduce emissions faster without hurting the economy, according to joint research underpinning four papers published today. The analyses were conducted by Columbia University's Center on Global Energy Policy in conjunction with the Urban-Brookings Tax Policy Center, the Rhodium Group, and Rice University's Baker Institute for Public Policy and come the week that the House of Representatives is expected to vote on a non-binding resolution condemning the carbon tax as detrimental to the economy.

The papers model a carbon tax beginning at $14, $50, and $73 per ton of emissions starting in 2020. According to the findings, in the first decade alone federal revenue would increase $60-250 billion annually; a $50/ton carbon tax would slash emissions by 39 percent by 2030, 46 percent below 2005 levels, a more stringent reduction than the U.S. committed to under the Paris Climate Agreement; and if the policy includes payroll tax cuts and/or dividends to Americans, costs to consumers can be more than mitigated. According to the summary, "if the revenues are rebated to households equally, the combination of tax policies could be progressive, with lower income households receiving rebates that significantly exceed what they pay in additional taxes."

The emissions reductions would primarily occur in the electric power sector, where most economy-wide emissions occur.