Implementing a US Carbon Tax
Challenges and Debates
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Although the future extent and effects of global climate change remain uncertain, the expected damages are not zero, and risks of serious environmental and macroeconomic consequences rise with increasing atmospheric greenhouse gas concentrations. Despite the uncertainties, reducing emissions now makes sense, and a carbon tax is the simplest, most effective, and least costly way to do this. At the same time, a carbon tax would provide substantial new revenues which may be badly needed, given historically high debt-to-GDP levels, pressures on social security and medical budgets, and calls to reform taxes on personal and corporate income.
This book is about the practicalities of introducing a carbon tax, set against the broader fiscal context. It consists of thirteen chapters, written by leading experts, covering the full range of issues policymakers would need to understand, such as the revenue potential of a carbon tax, how the tax can be administered, the advantages of carbon taxes over other mitigation instruments and the environmental and macroeconomic impacts of the tax.
A carbon tax can work in the United States. This volume shows how, by laying out sound design principles, opportunities for broader policy reforms, and feasible solutions to specific implementation challenges.
Table of Contents
1. Carbon Taxes as Part of the Fiscal Solution 2. Choosing among Mitigation Instruments: How Strong is the Case for a US Carbon Tax? 3. Administration of a US Carbon Tax 4. Carbon Taxes to Achieve Emissions Targets – Insights from EMF 24 5. Macroeconomic Effects of Carbon Taxes 6. The Distributional Burden of a Carbon Tax: Evidence and Implications for Policy 7. Offsetting a Carbon Tax’s Burden on Low-Income Households 8. Carbon Taxes and Corporate Tax Reform 9. Carbon Taxes and Energy Intensive Trade Exposed Industries: Impacts and Options 10. The Role of Energy Technology Policy Alongside Carbon Pricing 11. Mixing It Up: Power Sector Energy and Regional and Regulatory Climate Policies in the Presence of a Carbon Tax 12. Implications of Carbon Taxes for Transportation Policies 13. Comparing Countries’ Climate Mitigation Efforts in a Post-Kyoto World
Ian Parry is Principal Environmental Fiscal Policy Expert in the Fiscal Affairs Department of the IMF
Adele Morris is a fellow and policy director for Climate and Energy Economics at the Brookings Institution.
Roberton C. Williams III is a Professor in the Department of Agricultural and Resource Economics at the University of Maryland, Senior Fellow and Director of Academic Programs at Resources for the Future, and a Research Associate of the National Bureau of Economic Research.
‘Government debt and global climate change are two of the great problems of our time. Carbon taxation uniquely has the potential to address both. But as always the devil is in the details. This important volume is lucid, comprehensive and acute on all the issues bearing on the decision to implement carbon taxes. It will be an essential resource in the debates to come.’ — Larry Summers, President Emeritus and Charles W. Eliot Professor, Harvard University, USA
‘There is little doubt in my mind that for dealing for global climate change, the best policy includes a tax on carbon emissions. This new volume edited by Parry, Morris, and Williams dives into the details to help make this simple and sensible policy a reality.’ — N. Gregory Mankiw, Professor of Economics, Harvard University, USA
‘This important and timely book of papers by a distinguished bipartisan group of economists lays out the case for a carbon tax as the most effective and efficient way to reduce carbon emissions while generating a large fiscal dividend. The papers tackle the most challenging questions about a carbon tax including its size, and how to offset its potential negative effects on low-income households, economic growth and competitiveness. The book’s overarching conclusion is that a well-designed carbon tax would have significant benefits for the environment, for the long-run fiscal outlook, and for economic growth.’ — Laura Tyson, Professor of Business Administration and Economics, and Director, Institute for Business & Social Impact, Haas Business and Public Policy Group, University of California at Berkeley, USA