Considering a Carbon Tax–Gasoline Tax Swap
The MARKET CHOICE Act would replace the federal excise tax on gasoline and diesel fuel with a tax on GHG emissions.
- The MARKET CHOICE Act introduces a tax of $24 per ton (of CO2-equivalent) on GHG emissions beginning in 2020. The tax rises at 2% annually. If the bill becomes law, we project that energy-related CO2 emissions will be 29% below 2005 levels in 2030.
- In the power sector, CO2 emissions are expected to be 56% below 2005 levels in 2030. For comparison, the Obama administration’s EPA projected CO2 emissions to be 32% below 2005 levels under the Clean Power Plan.
- Repealing the federal excise tax on gasoline and diesel fuel would significantly reduce price impacts at the pump. As a result, the analysis predicts very small changes in transportation-related emissions.
- Gross revenues from the tax on CO2 emissions are expected to exceed $1 trillion over the first 10 years of the policy.
- This analysis does not attempt to model two important aspects of the act: border adjustments and the tax on emissions of non-energy-related CO2 and other greenhouse gases.
- The MARKET CHOICE Act includes an adjustment mechanism to increase the price over time if key emissions targets are not met. Emissions targets in the bill were directly informed by this analysis.
Media Highlight — Jan 27, 2023
Bloomberg: "Air and Climate Standards Top EPA's 2023 Rulemaking To-Do List"
Comments made by EPA Deputy Administrator Janet McCabe during RFF's Big Decisions 2023 event in January feature heavily in a story about EPA priorities.
Resources Radio — Jan 10, 2023
Does Cap and Trade Exacerbate Environmental Injustice in California?, with Danae Hernández-Cortés
Danae Hernández-Cortés discusses how California’s cap-and-trade program affects levels of air pollution in environmental justice communities.
Resources Magazine — Oct 19, 2022
Air Pollution Exposure in New York City Schools
Beia Spiller discusses how community-engaged research produces new knowledge, informs policymaking, and benefits communities that are engaged in the research.
On the Issues — Oct 7, 2022
On the Issues: International Trade, World Carbon Pricing Database, and More
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: international trade, World Carbon Pricing Database, and more.