This paper describes a carbon tax swap that is both revenue and distributionally neutral. The tax swap would levy a tax on greenhouse gas emissions. The revenue would be used to fund a reduction in the income tax, tied to earned income. Specifically, the proposal calls for a tax on greenhouse gas emissions at an initial rate of $15 per ton of carbon dioxide equivalent, and gradually increasing over time. A refundable tax credit would be offered for sequestered greenhouse gases and other approved sequestration activities. In addition, to offset the new carbon tax, the proposal would implement an environmental tax credit in the personal income tax equal to the employer and employee payroll taxes on initial earnings up to a limit.
This paper begins with a discussion of the problem of greenhouse gas emissions and provides a rationale for setting a price on carbon emissions. It then provides a distributional analysis of the proposal described above. Following this analysis, it makes a case for why carbon pricing through a tax should be considered a viable alternative to carbon pricing through a cap-and-trade system. It concludes with a response to various objections made to carbon pricing in general and a carbon tax in particular.
David G. Victor speaks on Geoengineering at CERAWeek 2019 in Houston, Texas.
David G. Victor speaks on Nature-based climate and energy solutions at CERAWeek 2019.
[On India's renewable energy capacity goals] [This] target implies annual growth of 25 percent — a targeted buildout rate even faster than China’s, which is widely seen as the world’s leader in deploying renewable energy.