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This year’s Conference of the Parties (COP-29) broke new ground with the Baku Initiative for Climate Finance, Investment, and Trade (BICFIT)—the first high-profile COP initiative to place trade...
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This week host Jason Bordoff talks with Cheryl LaFleur and David Hill about the incoming Trump administration, its impact on FERC, and the status of permitting reform measures.
Reports by John Larsen, Shashank Mohan, Peter Marsters + 1 more • July 17, 2018
A price on carbon dioxide (CO2) and other greenhouse gas (GHG) emissions has long been a preferred instrument among economists and other academics for addressing the threat of climate change.[1] The idea is simple: putting a price on carbon internalizes the societal costs caused by consumption of fossil fuels and other activities that emit GHGs. The concept sits firmly in the tradition of Pigouvian taxation, which has been applied to address other “externalities”—from the health system costs of tobacco and alcohol use to the environmental cost of substances that deplete Earth’s ozone layer. The concept of pricing carbon by way of a tax has been gaining traction among economists as an efficient, market-based strategy for reducing GHG emissions in the United States. More recently, the idea has garnered the attention of prominent Republicans and Democrats within and outside of Congress as well as advocates on the left and right poles of the national political spectrum.
Regardless of the motivation for pursuing a carbon tax, current and future discussions can benefit from an up-to-date and comprehensive assessment of what such a policy would mean for the US energy system and resulting GHG emissions in the future.
This paper is part of a series under the Columbia University Center on Global Energy Policy’s Carbon Tax Research Initiative. It provides projections of the US energy system and emissions implications of carbon taxes and associated policy choices[2] using RHG-NEMS, which is a version of the National Energy Modeling System (NEMS) maintained by the Rhodium Group.[3] NEMS is developed and used by the Energy Information Administration (EIA) to produce its Annual Energy Outlook and relied on by Congress to assess the impact of past energy and climate legislation.[4]
This paper seeks to answer key questions about the impacts of a carbon tax in the United States. First, how responsive are different sectors of the US economy to a carbon tax at different tax rates? The answer has important policy implications, such as the amount of federal revenue collected under any given tax rate, the likelihood of achieving specified GHG reduction targets, and the potential role of other emission reducing policies. Second, what changes in energy prices, production, and consumption occur under different tax rates? These questions are addressed by assessing three carbon tax rate scenarios.
Based on this analysis, we make the following key findings:
While this paper focuses on the emissions and energy system impacts of a carbon tax in the United States, the results are used in separate analyses of the potential distributional and macroeconomic impacts of a carbon tax, which are also part of the CGEP Carbon Tax Research Initiative series.
[1] David Chandler, “Emeritus: David Wilson Was an Early Proponent of the Concept of Energy-use Fees,” MIT News, November 2013, Accessed June 8th, 2018, http://news.mit. edu/2013/emeritus-david-wilson-was-early-proponent-concept-energy-use-fees.
[2] “Carbon Tax Initiative Research,” Columbia | SIPA Center On Global Energy Policy, 2018, Accessed June 15th, 2018, https://energypolicy.columbia.edu/our-work/topics/climate- change-environment/carbon-tax-research-initiative/carbon-tax-initiative-research.
[3] “Availability of the National Energy Modeling System (NEMS) Archive,” Energy Information Administration, 2018, Accessed June 11th, 2018, https://www.eia.gov/outlooks/aeo/info_ nems_archive.php.
[4] “Annual Energy Outlook 2018”, Energy Information Administration, 2018, Accessed June 11th, 2018, https://www.eia.gov/outlooks/aeo/index.php.
CGEP is pleased to announce a new AI & Energy series—part of our Energy Explained blog. In the first entry, the authors write about AI's potential impacts on the...
Kenya and South Africa have recently started moving toward an open access regime in their electricity sectors, while the US and India have been on this path for over two decades.
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Reports by John Larsen, Shashank Mohan, Peter Marsters + 1 more • July 17, 2018