Earlier this week at the Paris climate conference, President Obama said that imposing a price on carbon emissions “was a smarter way to deal with pollution than a command-and-control system.” Many experts agree that “much of the economic pain from rising energy costs could be minimized” by a revenue-neutral carbon tax. In the current issue of Resources magazine, RFF experts and colleagues explore several questions regarding the design and implementation of a carbon tax:
“A carbon tax is unlikely to reduce the number of jobs in the US economy, contrary to what some critics suggest. Instead, jobs will shift away from polluting industries toward cleaner ones, a transition that can be made smoother by sound policy design,” writes RFF’s Marc Hafstead and Rob Williams.
“A climate rebate delivered through existing tax and benefit systems can shield low- and moderate-income households from the rising prices of electricity, gasoline, and other energy-intensive goods that would occur under a carbon tax regime,” writes Chad Stone of the Center on Budget and Policy Priorities.
“Lump sum rebates [to households] are the most progressive—but also the most expensive by far … Recycling the revenue to cut capital taxes is the most efficient of the three scenarios (that is, the best for the economy as a whole), but it further exacerbates the regressivity of a carbon tax … Using carbon tax revenue to reduce taxes on labor can be seen as a middle-of-the-road option,” writes RFF’s Roberton C Williams III, Dallas Burtraw, and Richard D. Morgenstern.
RFF on the Issues connects today’s pressing news with related research and expertise at RFF.
