RFF on the Issues

RFF on the Issues: Baker-Shultz Carbon Tax Proposal Informed by RFF Research

Feb 8, 2017 | Peter Nelson

Former US Secretary of State and Treasury Secretary James A. Baker III and others met with White House officials today to discuss a carbon tax proposal outlined and backed by Baker and other senior Republican politicians, including former Secretary of State and Treasury Secretary George Shultz. Baker says “the plan follow[s] classic conservative principles of free-market solutions and small government.”

The design of the policy put forth by Baker’s group was informed by research by RFF’s Yunguang Chen and Marc Hafstead examining the carbon tax level necessary to meet the US pledge to reduce emissions under the Paris Agreement, as well as analysis by Hafstead and RFF’s Ray Kopp evaluating the American Opportunity Carbon Fee Act. This work provided context for developing “consistent estimates of the emissions impact of a carbon tax” outlined in the proposal.

As with any policy, the devil is in the details. Recent work by RFF’s Joseph Aldy of Harvard University offers insight for designing and updating a predictable and sound carbon tax policy in an uncertain environment to account for new information over time. Under Aldy’s “structured discretion” approach, “the scheduled reporting and presidential recommendation process can ensure that businesses and households can anticipate and credibly predict the evolution of US carbon tax policy.”

Read more analysis by RFF experts on a carbon tax—Considering a US Carbon Tax: Economic Analysis and Dialogue on Carbon Pricing Options.

RFF on the Issues connects today’s pressing news with related research and expertise at RFF.

The views expressed in RFF blog posts are those of the authors and should not be attributed to Resources for the Future.