Macroeconomic Analysis of Federal Carbon Taxes
An economy-wide federal carbon tax can significantly reduce US carbon dioxide emissions but will also impact the US economy. A modeling exercise examines these macroeconomic impacts and demonstrates the effects of the tax on consumer prices and welfare.
- A carbon tax can substantially reduce carbon emissions at a relatively low cost.
- How the carbon tax revenue is used matters. Using the revenues to reduce existing taxes, such as the corporate income tax, significantly reduces the cost of the policy compared to lump-sum rebating of the revenues to households.
- The welfare cost per ton of carbon dioxide reduced is significantly below central estimates of the social cost of carbon when the carbon tax revenues are used to reduce corporate income taxes.
- Based on our estimates, using carbon tax revenues to reduce corporate income taxes would pass a cost–benefit test by a significant margin.
Marc Hafstead is an RFF fellow and director of the Carbon Pricing Initiative and the Climate Finance and Financial Risk Initiative.
Raymond J. Kopp
Raymond J. Kopp is a senior fellow and the director of the Comprehensive Climate Strategies program at RFF. During his career Kopp has specialized in the analysis of environmental and natural resource issues with a focus on Federal regulatory activity.
Report — Jan 30, 2023
Policies on the Road to Carbon Neutrality in the Intermountain West
Resources for the Future partnered with Intermountain West Energy Sustainability & Transitions (I-WEST) to map the existing policy landscape of the Intermountain West and define policy's role in decarbonizing the region.
Testimony and Public Comments — Jan 18, 2023
Comments to EPA on the IRA’s Transportation Programs
To the Environmental Protection Agency on the Request for Information related to the Inflation Reduction Act's Transportation Programs.
Working Paper — Jan 3, 2023
What Are the Climate, Air Pollution, and Health Benefits of Electric Vehicles?
This working paper models the climate and health benefits of plug-in vehicles under five different policy and market scenarios.
On the Issues — Dec 23, 2022
On the Issues: Happy Holidays from Resources from the Future
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: RFF's top stories of 2022, the end of RFF's 70th anniversary, and more.