Interest in a hybrid carbon tax that provides some assurance that emissions reduction targets will be met has emerged recently. To better understand how such a hybrid tax could work, I describe a prototype emissions assurance mechanism (EAM) to provide policy certainty that is practical, simple to implement, and easily understood. I outline an EAM that would lead to a 45 percent reduction in energy-related carbon dioxide emissions by 2035 relative to emissions in 2005. In 2035, an assessment would be made about a target reduction in emissions for the next 15 years. Emissions are compared with an emissions pathway in each year. So long as cumulative emissions since the first year of the carbon tax do not exceed cumulative emissions along the emissions pathway, the carbon tax rate would increase at a standard escalator of 5 percent per year (plus inflation). If cumulative emissions exceed cumulative emissions along the pathway, an accelerated escalator of 10 percent would be used to increase the tax rate each year. Similarly, if cumulative emissions fall well below the pathway, the tax rate would be held constant (in real terms). The emissions pathway and EAM would be built into the carbon tax legislation.
Journal Article — Jan 16, 2020
Measuring the Macroeconomic Impact of Carbon Taxes
Using new data on European carbon taxes, Gilbert Metcalf and James Stock find that there is no robust evidence of a negative effect on employment or GDP growth from carbon pricing.
Press Release — Nov 12, 2019
New Episode of Resources Radio: “Carbon Pricing Proposals in Today's Congress, with Marc Hafstead”
Marc Hafstead offers insight on the numerous carbon pricing proposals that have been introduced in the US Congress.
Carbon Pricing Proposals in Today's Congress, with Marc Hafstead
In a special crossover episode with CSIS' Energy 360° podcast, Marc Hafstead analyzes the recent cluster of carbon pricing proposals that have been introduced in the US Congress.