A federal carbon tax is a win-win, reducing emissions while having a minimal effect on the national economy, according to a policy brief released Monday by Resources for the Future. “A carbon tax can substantially reduce carbon emissions at a relatively low cost. How the carbon tax revenue is used matters. Using the revenues to reduce existing taxes, such as the corporate income tax, significantly reduces the cost of the policy compared to lump-sum rebating of the revenues to households,” according to the brief.
The RFF researchers compared three situations in their study: one in which no carbon tax is imposed; one in which a carbon tax is imposed and the revenue is distributed back to each U.S. household in equal shares; and one in which a carbon tax is employed and most of the revenue used to reduce the corporate income tax rate by 6 percentage points, with the remaining revenue recycled through lump-sum rebates.
