RFF Posts Analysis of Reintroduced Carbon Fee Act
WASHINGTON, DC—Senators Sheldon Whitehouse (D-RI) and Brian Schatz (D-HI) yesterday reintroduced the American Opportunity Carbon Fee Act. They were joined by new cosponsors Sen. Martin Heinrich (D-NM) and Sen. Kirsten Gillibrand (D-NY). The act aims to address climate issues by levying a fee on US greenhouse gas emissions. Resources for the Future (RFF) evaluated the impact of the proposed legislation on carbon dioxide (CO2) emissions using state-of-the-art modeling assessments.
When introducing the earlier version of this bill, Sen. Whitehouse remarked, “This bill would fight carbon pollution with the full power of the free market, driving down emissions and leveling the playing field for carbon-free energy.” The same goals are reflected in the new edition.
Today, RFF published an issue brief by Fellow Marc Hafstead that projects energy-related CO2 emissions through 2035 under the proposed legislation. The new paper is called, "Projected CO2 Emissions Reductions under the American Opportunity Carbon Fee Act of 2019." Among the basic findings are:
- The proposed legislation imposes a carbon fee on fossil fuels where they are mined, processed, refined, or imported. The fee starts at $52 per metric ton CO2 equivalent and rises at 6 percent above inflation annually. By 2035, the fee would be about $125 per metric ton (in 2020 dollars).
- Under the proposed legislation, emissions are projected to fall substantially in the first year of the policy in 2020—25 percent relative to the baseline level of emissions—and projected to continue to decline as the carbon fee rises over time. By 2029, these emissions are projected to be 49 percent of 2005 levels (or a 51 percent decline relative to 2005), and by 2035 emissions are projected to be 43 percent of 2005 levels (or a 57 percent decline relative to 2005).
- Despite significant reductions in emissions between 2020 and 2035, revenues from the fee on energy-related CO2 emissions are projected to increase over time as the increasing fee offsets declining emissions. In the first year of the policy, the revenues are projected to be approximately $200 billion; over the first 10 years, revenues are projected to be about $2.3 trillion.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
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