Over the course of the next two years, the Center on Global Energy Policy will complete the following series of projects that provide clear, objective, and data-driven research on carbon taxes to policymakers, business leaders, students and the general public. Additional research projects and institutional partners will be added to the initiative over time.
What is the value of a carbon tax, and what are the different design options policymakers should consider? This first project in the series, in collaboration with the Rhodium Group, addresses issues including: the level of the tax rates, where a tax could be applied, how broad it could be, revenue use alternatives, and how to address concerns of international competitiveness and emissions leakage.
Interaction with Existing Policies (Spring 2018)
Certain federal and state policies make good complements to a federal carbon tax; others are duplicative or conflicting. Many “climate policies” have additional objectives, such as reducing local air pollution, enhancing energy security, and creating jobs. It will be important for policymakers to understand these policy interactions as they consider what policies to add, subtract or change when a federal carbon tax is implemented. This project is in collaboration with with Columbia University’s Sabin Center for Climate Change Law.
Energy Market and Environmental Impacts (Spring 2018)
This project, in collaboration with the Rhodium Group, will provide insights into the likely effects of carbon taxes on energy producers, consumers, and markets, as well as on U.S. emissions of greenhouse gases. The results will come from original analysis conducted by the Rhodium Group using the RHG-NEMS model, and will examine various carbon tax scenarios. The findings will shed light on important questions such as the tax rates needed to achieve various emissions outcomes and the associated effects on energy prices.
Macroeconomic Effects (Summer 2018)
This project, in collaboration with Tax Policy Advisors, will examine how various potential carbon taxes affect macroeconomic outcomes (GDP, investment, labor supply, etc.) as well as impacts across households of varying income levels. The results will come from a computable general equilibrium (CGE) model designed to analyze both short-run and long-run macroeconomic outcomes, and will use the results from the Rhodium Group’s energy sector modeling as inputs. The findings will help policymakers ensure the carbon tax fits into a pro-growth economic strategy.
Distributional Effects (Summer 2018)
This project, in collaboration with the Tax Policy Center (Urban Institute / Brookings Institution), will analyze the impacts of various potential carbon taxes on segments of the U.S. population, including households of different income levels. The results will come from a state-of-the-art microsimulation model, using the results from the Rhodium Group’s energy sector modeling as inputs. These findings will help policymakers design an equitable carbon tax that does not lead to excess burdens for segments of the population.
International Competitiveness (Fall 2018)
A key concern is whether a carbon tax will put U.S. manufacturers at a competitive disadvantage relative to foreign companies and if that migration of industry overseas will undermine the environmental effectiveness of the carbon tax. This project will examine the extent to which a carbon tax could put U.S. industry at a competitive disadvantage, and how policymakers can design a carbon tax so that it will not.
Transition Assistance (Fall 2018)
A carbon tax will reduce demand for coal, among other changes to the fuel mix, and will have a significant effect on U.S. coal companies, coal miners, and the communities in which they live, exacerbating the pressure they already face from decades of mechanization in the coal industry, low-cost natural gas as a competitor to coal, and generally weak domestic electricity demand growth. This project will examine how the combination of market forces and public policies may affect coal communities, and outline ways a carbon tax can be designed to provide benefits to these communities.