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February 2016

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Carbon Tax: Index

Carbon Tax: Introduction ................................................................................................................................... 5 Carbon Tax: Definitions and Descriptions ....................................................................................................... 12

Carbon Tax: ProCarbon Tax Desirable: Topshelf ...................................................................................................................... 14 Carbon Tax Desirable: Air Pollution ............................................................................................................... 16 Carbon Tax Desirable: Budget Deficit / Revenue ............................................................................................ 17 Carbon Tax Desirable: Business Confidence / Predictability ........................................................................... 20 Carbon Tax Desirable: Economy — Topshelf ................................................................................................... 22

Carbon Tax Desirable: Economy — General ..................................................................................................... 23 Carbon Tax Desirable: Economy — Jobs / Cost ................................................................................................ 24 Carbon Tax Desirable: Economy — Offsets ...................................................................................................... 25 Carbon Tax Desirable: Economy —Answers to “Competitiveness / Energy Key” .......................................... 26 Carbon Tax Desirable: Effective — Innovation ................................................................................................. 28 Carbon Tax Desirable: Effective — Market Signal ........................................................................................... 31 Carbon Tax Desirable: Effective — Other Countries Prove .............................................................................. 32 Carbon Tax Desirable: Effective —Answers to “Implementation Problems”................................................... 33 Carbon Tax Desirable: Energy Security ........................................................................................................... 35

Carbon Tax Desirable: Fiscal Reform .............................................................................................................. 36

Carbon Tax Desirable: Fossil Fuel Shift .......................................................................................................... 37

Carbon Tax Desirable: Green Energy Development ........................................................................................ 39

Carbon Tax Desirable: Infrastructure Investment ............................................................................................ 43

Carbon Tax Desirable: Mechanism — General ................................................................................................. 44

Carbon Tax Desirable: Mechanism — Border Tariff ......................................................................................... 45

Carbon Tax Desirable: Mechanism — Offset / Revenue Neutral ...................................................................... 46

Carbon Tax Desirable: Mechanism — Phase-In ................................................................................................ 47

Carbon Tax Desirable: Mechanism — Reinvestment ........................................................................................ 48 Carbon Tax Desirable: Mechanism — Reinvestment (CCS) ............................................................................. 52

Carbon Tax Desirable: Mechanism — Upstream............................................................................................... 54

Carbon Tax Desirable: Multiwarrant / General ................................................................................................ 55 Carbon Tax Desirable: Politically Feasible ...................................................................................................... 57 Carbon Tax Desirable: Warming — General ..................................................................................................... 58 Carbon Tax Desirable: Warming — Emissions Cuts (General) ......................................................................... 61 Carbon Tax Desirable: Warming — Emissions Cuts (Efficiency / Cost)........................................................... 63 Carbon Tax Desirable: Warming — Human Caused ......................................................................................... 64 Carbon Tax Desirable: Warming — Justifies Action ......................................................................................... 66 Carbon Tax Desirable: Warming — Real .......................................................................................................... 69

Carbon Tax Desirable: Warming —Answers to “Leakage” .............................................................................. 70 Carbon Tax Desirable: Answers to “Alternatives” (General) .......................................................................... 71

Carbon Tax Desirable: Answers to “Alternatives— Cap-and-Trade” (Comparative) ....................................... 73 Carbon Tax Desirable: Answers to “Alternatives— Cap-and-Trade” (Fails) ................................................... 79 Carbon Tax Desirable: Answers to “Alternatives—Regulations” .................................................................... 82 Carbon Tax Desirable: Answers to “Alternatives—Subsidies” ....................................................................... 84 Carbon Tax Desirable: Answers to “Conservative Objections” ....................................................................... 86 Carbon Tax Desirable: Answers to “Cost Shift” .............................................................................................. 87 Carbon Tax Desirable: Answers to “Domestic Action Fails” .......................................................................... 88 Carbon Tax Desirable: Answers to “Equity Concerns” ................................................................................... 89 Carbon Tax Desirable: Answers to “Free Markets Superior / Autonomy” ...................................................... 91 Carbon Tax Desirable: Answers to “Protectionism / WTO Compliance” ........................................................ 93

Carbon Tax: ConCarbon Tax Undesirable: Topshelf .................................................................................................................. 95 Carbon Tax Undesirable: Alternatives — CAFE Standards .............................................................................. 98

Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Topshelf) ............................................................. 100 Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Comparative Evidence) ....................................... 101 Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Cost Effective / Economy) ................................... 102 Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Emissions Cuts) ................................................... 104 Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Green Energy) ..................................................... 105

Carbon Tax Undesirable: Alternatives — Cap-and-Trade (Global Cuts)......................................................... 107 Carbon Tax Undesirable: Alternatives — Free Markets .................................................................................. 109

Carbon Tax Undesirable: Alternatives — Growth Strategy ............................................................................. 111

Carbon Tax Undesirable: Alternatives — Innovation / Tech Strategy ............................................................. 113

Carbon Tax Undesirable: Alternatives — Subsidies ........................................................................................ 114

Carbon Tax Undesirable: Deforestation ......................................................................................................... 115

Carbon Tax Undesirable: Economy — General ............................................................................................... 116

Carbon Tax Undesirable: Economy — Calibration Problems.......................................................................... 119


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Carbon Tax Undesirable: Economy — Capital Flight ..................................................................................... 120

Carbon Tax Undesirable: Economy — Carbon Spillover Benefits .................................................................. 121

Carbon Tax Undesirable: Economy — Energy Prices ..................................................................................... 122 Carbon Tax Undesirable: Economy — Export Competitiveness ..................................................................... 123 Carbon Tax Undesirable: Economy — Jobs .................................................................................................... 124 Carbon Tax Undesirable: Economy — Multiwarrant / General ....................................................................... 125 Carbon Tax Undesirable: Economy — Tax Interactions ................................................................................. 126 Carbon Tax Undesirable: Economy — Wages ................................................................................................ 127

Carbon Tax Undesirable; Economy —Answers to “Adaptation / Innovation” ............................................... 128

Carbon Tax Undesirable: Economy —Answers to “Offsets / Neutrality” ...................................................... 132

Carbon Tax Undesirable: Empirically — Australia ......................................................................................... 135 Carbon Tax Undesirable: Empirically — British Columbia ............................................................................ 137 Carbon Tax Undesirable: Empirically — Norway ........................................................................................... 139 Carbon Tax Undesirable: Equity Concerns .................................................................................................... 140 Carbon Tax Undesirable: Fails — General ...................................................................................................... 143 Carbon Tax Undesirable: Fails — Enforcement Problems .............................................................................. 144 Carbon Tax Undesirable: Fails — Politicization .............................................................................................. 145 Carbon Tax Undesirable: Fails —Answers to “Efficient” .............................................................................. 147 Carbon Tax Undesirable: Fossil Fuel Use / Gas Shift .................................................................................... 148 Carbon Tax Undesirable: Free Markets ......................................................................................................... 149 Carbon Tax Undesirable: Multiwarrant / General .......................................................................................... 151

Carbon Tax Undesirable: Political Opposition ............................................................................................... 153 Carbon Tax Undesirable: Regional Disparities .............................................................................................. 155

Carbon Tax Undesirable: Rent-Seeking ......................................................................................................... 156 Carbon Tax Undesirable: Sovereignty Concerns / WTO ............................................................................... 158

Carbon Tax Undesirable: Warming — Topshelf ............................................................................................. 159

Carbon Tax Undesirable: Warming — Calibration Problems .......................................................................... 160

Carbon Tax Undesirable: Warming — Cannot Cut Emissions Enough ........................................................... 162

Carbon Tax Undesirable: Warming — Leakage .............................................................................................. 163

Carbon Tax Undesirable: Warming — No Warming Problem ........................................................................ 166

Carbon Tax Undesirable: Warming — Other Countries .................................................................................. 168

Carbon Tax Undesirable: Warming —Answers to “Insurance Policy” ........................................................... 170

Carbon Tax Undesirable: Warming —Answers to “Other Countries Model / Follow” .................................. 171 Carbon Tax Undesirable: Answers to “Air Pollution” ................................................................................... 172

Carbon Tax Undesirable: Answers to “Budget / Revenues” .......................................................................... 173 Carbon Tax Undesirable: Answers to “Cap-and-Trade Is Worse” ................................................................. 174 Carbon Tax Undesirable: Answers to “Conservative Justifications / Grand Bargain” ................................... 175 Carbon Tax Undesirable: Answers to “Energy Security” .............................................................................. 176

Carbon Tax Undesirable: Answers to “Fossil Fuels Privileged Now” ........................................................... 177

Carbon Tax Undesirable: Answers to “Nordhaus Evidence” ......................................................................... 178 Carbon Tax Undesirable: Answers to “Price Increases Spur Innovation” ...................................................... 180 Carbon Tax Undesirable: Answers to “Revenue Neutrality” ......................................................................... 181 Car bon Tax Undesirable: Answers to “Social Cost of Carbon” ..................................................................... 183


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Carbon Tax: Introduction

Resolved: The United States federal government should adopt a carbon tax.

The controversy about how the United States and other countries should respond to the threat of climate change is

arguably one of the most important public policy debates that we collectively face. The issue has significant urgency for a

number of reasons, including the emergence of weather and environmental changes that are likely linked to human-causedclimate change and the recent breakthroughs in international negotiations over limits on the emission of greenhouse gases

This month’s NSDA Public Forum resolution asks students to assess the effectiveness of one of the most hotly contested

potential responses to climate change, a carbon tax. This is a fascinating topic, tying together issues surrounding energy

policy, environmental stewardship, international relations, and a wide variety of other topics. The resolution’s focus — a

carbon tax — accesses a specific, in-depth, and relatively balanced literature base.

Although proponents claim that a carbon tax has a number of ancillary benefits, the primary justification for a carbon tax

is the threat posed by climate change. Humans have understood for nearly two centuries that carbon dioxide (CO2) and

other gases are responsible for a warming of the Earth’s surface. Carbon dioxide, methane, water vapor, and other trace

gases in the atmosphere absorb and emit infrared radiation from sunlight, which in turn warms the Earth’s lower

atmosphere and surface. Without this natural greenhouse effect, the temperatures on the planet’s surface would be farlower, perhaps so cold that most of the planet would be unable to support life. We also know from geological evidence,

including ancient ice cores taken from Antarctica and Greenland that carbon dioxide levels have varied substantially

throughout the planet’s history. Many climatologists, led by Dr. James Hansen of NASA, predicted as early as 1981 that

the burning of fossil fuels and other human activities were responsible for elevating the concentration of greenhouse

gases, particularly carbon dioxide, in the atmosphere, and that these elevated CO2 levels were increasing the globe’s

average temperature. An increasingly impressive body of scientific evidence seemed to validate what was at the time

called the ‘global warming hypothesis.’ The issue drew considerable attention, and eventually led to the formation of the

Intergovernmental Panel on Climate Change (IPCC), a global body deputized to compile the available research on climate

change and reach a judgment on whether human activities were affecting the climate. The IPCC has published several

major reports. Even the ‘summary for policymakers’ of these reports make for pretty tough reading, but even a cursory

survey of the IPCCs conclusions indicate that the organization, which boasts well over 1000 members from many

scientific backgrounds and nations, is increasingly confident that human activity is affect climate. Most scientists accept

climate change as a fact, and many worry that an increase in the planet’s temperature and subsequent environmental

changes could have dire consequences for humanity. At the very worst extreme, warming gets out of control as positive

feedbacks continue to pump more and more greenhouse gases into the atmosphere until the Earth becomes too warm to

support complex life forms. Various adaptive technologies and techniques will limit some of the worst effects of warming

but there is very good evidence that warming will overwhelm the adaptive capacity of many farmers, particularly in

tropical regions and nations where farmers tend to be too poor to afford high-tech seeds, equipment, and infrastructure.

On the other side, skeptics argue that the Earth’s temperature is not increasing, and that there is little reason to believe that

human activities will have a substantial effect on something as complex and powerful as climate. These critics offer a

number of objections. They claim that temperature records do not support the warming hypothesis, that causes other than

human activity explain temperature variability, that warming may be beneficial on balance, and that the purported

‘consensus’ about climate change is a sham. We have included evidence supporting many of the claims on both sides ofthe warming real / false debate. However, the bulk of our work is on the intricacies of a carbon tax — you may want to

consult your own backfiles for more evidence on the reality and consequences of climate change.

The approach to cutting greenhouse gas emissions preferred by most economists is a carbon tax. Such a tax is, according

to proponents, relatively easy to administer and benefits from transparency and predictability. The rationale for such a tax

is described in the following two quotations from pro-carbon tax law review articles:


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The other major alternative that utilizes market mechanisms is a carbon tax. Rather than issuing permits to polluters

based on a global emissions cap as with an ETS, the government imposes a tax on carbon emitted. There is no

aggregate limit, so, in theory at least, polluters could increase the amount of emissions into the atmosphere. The

difference with a tax from the present situation is that the polluter will be required to pay for this activity, with the

total price increasing with the total amount of emissions. As a consequence, one would not expect polluters to

increase their level of pollution if it were uneconomic to do so, because the costs of polluting (the tax) outweigh the

benefits. All other things being equal, as a carbon tax imposes a cost for a resource that hitherto had been costless, producers should reduce their use of that resource. An individual producer may be found to increase pollution if it

increases production to meet demand unmet due to marginal (i.e., less efficient) producers leaving the industry. This,

however, should result in an aggregate decrease in carbon emissions (i.e., the increase in the remaining producer's

pollution is likely to be less than the reduction resulting from less efficient producers ceasing production). [Keith

Kendall, Senior Lecturer, Law, La Trobe University, “Carbon Taxes and the WTO: A Carbon Charge without Trade

Concerns?” ARIZONA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW v. 29, Spring 2012, p. 60]

A carbon tax is a tax that is levied per ton of emissions of carbon dioxide. This form of climate change regulation is

recognized in the literature as being the simplest way to reduce carbon emissions. Carbon taxes act as a means of

internalizing negative externalities. Those who emit carbon through consumption, production, and distribution create

negative externalities in the form of pollution that affects all of society. Currently, those polluters are doing so with norepercussions. Through taxation, the polluters internalize those externalities. From an economic standpoint, this

internalization through taxation is a justifiable reason to impose a carbon tax. From an environ-mental standpoint, a

carbon tax implements the "polluter pays principle," as included in Principle 16 of the Rio Declaration. In short, this

means that whoever causes the pollution should have to bear the costs of the harm caused, as well as the cost of

minimizing future harm. [Stephen Sewalk, Assistant Professor, Daniels College of Business, University of Denver,

“Carbon Tax with Reinvestment Trumps Cap-and-Trade,” PACE ENVIRONMENTAL LAW REVIEW v. 30, Spring

2013, p. 582-583]

A carbon tax thus attempts to “internalize” the social costs of unfettered carbon dioxide emissions. The resulting increase

in fossil fuel prices would encourage users to be more efficient in their energy use and would likely spur the development

of cheaper green energy alternatives.

Carbon taxes raise many complex policy and implementation issues In many ways, a carbon tax will function similarly to

the gasoline taxes already collected by state and federal governments. These similarities and differences are outlined by

Professor Waggoner of the University of Colorado:

In its simplest form, a carbon tax would be imposed on the production of fossil carbon, whether by mining coal,

pumping petroleum, or extracting natural gas. The tax would not be based on the value of the product or on its energy

content, but solely on its carbon content. Coal consists overwhelmingly of carbon, so all of the material removed

would be taxed. Natural gas consists largely of methane or CH4, in which each molecule consists of one carbon atom

and four hydrogen atoms, so only a portion of the material removed would be taxed. Petroleum is a mixture of hydro-

carbon molecules that is intermediate between coal and natural gas, with each petroleum molecule including both

hydrogen and carbon atoms, but with more carbon and less hydrogen than natural gas. A carbon tax will resemble the

gasoline taxes imposed by the federal government and by state governments in the United States, but with three major

differences. The first arises in the point along the chain from mining to ultimate consumption where the tax is

imposed. The carbon tax would be imposed at the point of extraction, the very start of that chain, when the coal,

petroleum, or natural gas is first removed from the ground, whereas the gasoline tax is imposed at the end of the chain

when it is sold to the consumer. The second difference is the breadth of the taxes. The carbon tax would be imposed

on all forms of carbon extraction, and it would be applied regardless of end-use. Coal or petroleum used to make

plastics or fertilizer would be taxed, as would coal or petroleum used for fuel. On the other hand, the gasoline tax

applies to gasoline, which is only a part of the spectrum of products made from petroleum - and to a limited but

perhaps growing extent made from coal or natural gas - and only if the gasoline is to be used for certain purposes.


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Gasoline taxes are imposed on gasoline to be used in motor vehicles to pay for highways, on fuel for boats to protect

and improve inland waterways, and on fuel for aircraft to operate airports and the air traffic control system. Gasoline

to be used for farm equipment or to fuel cooking stoves, however, is normally exempt from the gasoline tax. The third

difference is in the use of the proceeds. Carbon tax revenue could be used for general government purposes, while the

gasoline tax revenue is used only to build, maintain, and operate highways, waterways, or airways. [Michael

Waggoner , Associate Professor, Law, University of Colorado, “Why and How to Tax Carbon,” COLORADO

JOURNAL OF INTERNATIONAL ENVIRONMENTAL LAW AND POLICY v. 20, Fall 2008, p. 9-10]

There are a number of ways in which a carbon tax could be implemented. Pro teams have an incentive to defend a specific

type of carbon tax, since doing so allows them to avoid some of the more general criticisms of a carbon tax. One major

question is where the taxes should be collected. Some of the collection options are discussed in the following selection

from paper from Resources for the Future, a major think tank:

There are various approaches that could be examined when implementing a carbon tax. For example, one approach is

to implement the tax “upstream”— that is, as an extension of existing fuel taxes already applied to petroleum

refineries, coal mines, and natural gas operators. Such a tax would affect approximately 2,000 companies.

Alternatively, the tax could combine taxes on transportation and home heating fuels with a downstream charge on

power plants and major industrial facilities. However, this could increase administrative costs (as it would cover about

13,000 companies), would be less comprehensive (as small-scale emitters are likely too costly to include), and possibly lead to greater pressure for exempting certain industries. In addition, Congress may face several challenges in

designing the tax. For example: Taxing only a limited share of carbon emissions — from a specific sector or only large

sources of emissions — could significantly lower revenue. A $25/ton CO2 tax could raise less than $40 billion per year

if applied only to the electricity sector, compared to $125 billion per year if applied to all emissions. Exempting some

sectors or categories of emissions sources may create perverse economic incentives that lower tax revenue while

increasing greenhouse gas emissions. A carbon tax targeting the electricity sector but exempting manufacturing could

result in an increase in on-site power generation at manufacturing plants. Increases in the tax rate would not

necessarily lead to proportional increases in revenues. A higher tax creates incentives to use lower-carbon alternatives

reducing emissions and reducing carbon tax revenue. [Joseph E. Aldy, Visiting Fellow, Timothy J. Brennan, Senior

Fellow, Dallas Burtraw, Senior Fellow, Carolyn Fischer, Senior Fellow, Raymond J. Kopp, Co-Director, Molly K.

Macauley, Vice President or Research, Richard D. Morgenstern, Senior Fellow, Karen L. Palmer, Research Director,Anthony Paul, Center Fellow, Nathan Richardson, Visiting Fellow and Robert C. Williams III, Director, Academic

Programs, “Considering a Carbon Tax: Frequently Asked Questions,” Resources for the Future, 11— 2 — 12,

www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16]

Another issues involves the size of the tax. Different sizing approaches are also outlined by Resources for the Future:

There are several approaches that Congress might consider when setting a carbon tax rate: using the real cost of

emissions, setting a price designed to achieve a revenue goal, or setting a price to achieve an emissions target. The

most common approach discussed by experts is to set a tax equal to the real cost of emissions, basing the price on the

global environmental damages from emissions, or the “social cost of carbon.” The social cost of carbon is the

discounted monetary value of future climate change damages due to additional CO2 emissions (for example, the costs

of adverse agricultural effects, protecting against rising sea levels, health impacts, species loss, r isks of extreme

warming scenarios, and so on). For example, a recent U.S. federal interagency assessment recommended a value of

$25 per ton for 2015 (in 2010$) with the tax rate rising at a rate of about 2 to 3 percent per year in real terms (roughly

reflecting growth in world output potentially affected by climate change). Research shows that a tax of $25 per ton of

CO2 would reduce emissions by roughly 10 percent per year (based on projections that energy-related CO2 emissions

would be about 5.5 to 5.8 billion tons annually for the next decade). Experts recommend that once in place, a carbon

tax would need to be flexible so it can be updated in response to future learning about climate change. Alternatively,

there has been discussion about designing a carbon tax to achieve a revenue goal, in which case the rate would depend


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on fuel prices (for example, the price of natural gas relative to coal). Some suggest setting a carbon tax to achieve an

emissions-reduction target. For example, a recent study by experts at Resources for the Future and the National

Energy Policy Institute suggests that a carbon tax reaching about $30 per ton of CO2 by 2020 would be needed to

reduce domestic, energy-related CO2 emissions by approximately 10 percent. To achieve this, the tax should rise at

approximately the risk-free rate of interest (near zero right now, but roughly 5 percent in the long run) to balance the

value in today’s terms of making adjustments in the future. ] Joseph E. Aldy, Visiting Fellow, Timothy J. Brennan,Senior Fellow, Dallas Burtraw, Senior Fellow, Carolyn Fischer, Senior Fellow, Raymond J. Kopp, Co-Director, Molly

K. Macauley, Vice President or Research, Richard D. Morgenstern, Senior Fellow, Karen L. Palmer, Research

Director, Anthony Paul, Center Fellow, Nathan Richardson, Visiting Fellow and Robert C. Williams III, Director,

Academic Programs, “Considering a Carbon Tax: Frequently Asked Questions,” Resources for the Future, 11— 2 —

12, www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16]

As touched upon earlier, how the revenues from a potential carbon tax will be used is a major point of contention, and one

that will almost certainly feature in many debates. There are two general approaches to using carbon tax revenue — offsets

and reinvestment. An offset strategy would devote the majority of the carbon tax revenue to decreasing taxes in other

areas, such as the personal income tax (PIT), corporate income taxes, or payroll taxes. Proponents of this approach claim

that we should use taxes to discourage socially undesirable behavior, such as increasing “carbon pollution,” and can wecan utilize the revenue from a carbon tax to decrease the tax burden on socially productive behavior, such as working,

investing, or starting a business. Such revenue neutrality allegedly minimizes the negative economic effects of a carbon

tax, particularly those affecting low-income persons. The reinvestment approach would use some portion of the revenue

used to meet public needs, including infrastructure investment and research and development spending. There are several

pieces of evidence supporting (and indicting) each strategy.

Assessing the effectiveness of a carbon tax most likely requires defending the efficacy of such a tax in light of other

policy alternatives. Climate action advocates have proposed a wide variety of individual, state, national, and international

policy options aimed at cutting the emission of greenhouse gases and / or encouraging adaptive measures necessary to

deal with the worst effects of climate change. Some of the most common alternatives include the use of research grants

and subsidies to encourage the development and deployment of green energy alternatives, the use of command-and-

control regulations to either limit carbon emissions(and fossil fuel use) through imposing technology standards (such as

fuel mileage requirements for automobiles), and the adoption of so-called “cap-and-trade” schemes. We have included

evidence on both sides of these policy options. Cap-and-trade is a relatively complex approach, and requires some

clarification:

A cap‐and‐trade system constrains the aggregate emissions of regulated sources by creating a limited number of

tradable emission allowances – in sum equal to the overall cap – and requiring those sources to surrender allowances

to cover their emissions (Stavins, 2007). Faced with the choice of surrendering an allowance or reducing emissions,

firms place a value on an allowance that reflects the cost of the emission reductions that can be avoided by

surrendering an allowance. Regardless of the initial allowance distribution, trading can lead allowances to be put to

their highest‐valued use: covering those emissions that are the most costly to reduce and providing the incentive to

undertake the least costly reductions (Montgomery, 1972; Hahn and Stavins, 2012). [Joseph E. Aldy and Robert N.

Stavins, staff, “The Promise and Problems of Pricing Carbon: Theory and Experience,” DISCUSSION PAPER,

Resources for the Future, 10 — 11, p. 5]

A recent law review article outlines the rationale for a cap-and-trade system. Please note that the author concludes that a

carbon tax is a superior policy option:

In order for a legislature to develop a cap-and-trade program, it is necessary to appoint a governmental agency to

establish a maximum level of emissions (a cap) on carbon; typically, at the start, this will only affect certain targeted

industries. The industries or firms targeted are then required to lower their GHG emissions below the cap. To

encourage participation and compliance with a goal of minimizing initial costs, it is common to provide these


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the emissions will decline. Many environmentalists prefer the cap-and-trade system because the cap ensures that the

environmental purposes of the act are met. [Derrick Morgan, Vice President, Domestic and Economic Policy,

Heritage Foundation, “A Carbon Tax Would Harm U.S. Competitiveness and Low-Income Americans Without

Helping the Environment,” BACKGROUNDER n. 2720, 8 — 21 — 12, www.heritage.org/research/reports/2012/08/a-

carbon-tax-would-harm-us-competitiveness-and-low-income-americans-without-helping-the-environment, accessed

1-3-16]

There is fantastic comparative evidence on both sides of the carbon tax vs. cap-and-trade debate, which should inspiresome highly competitive and in-depth debates this month.

The strongest elements of the pro-carbon tax position concern the threats posed by fossil fuel depletion and climate

change. The consensus of the scientific community holds that global warming is real, caused by humans, and poses a

potentially existential threat to humanity. As explained previously, the evidence supporting the need to act quickly to

address the climate change is quite potent. Oil and other fossil fuels are also being rapidly depleted, and many analysts

contend that we face medium-term fossil fuel shortages that will undermine our economy and spur international conflicts.

A carbon tax, supporters claim, is one of the least-intrusive and most effective means at our disposal to harness the power

of the market (through price signals) to spur a transition away from fossil fuels.

The case for a carbon tax in the United States is strong. A well-designed tax could efficiently reduce the emissions

that cause climate change, encourage innovation in cleaner technologies, and cut other pollutants. The resultingrevenue could finance tax reductions, spending priorities, or deficit reduction — policies that could offset the tax’s

distributional and economic burdens, improve the environment, or otherwise improve Americans’ well-being.

[Donald Marron, Institute Fellow, Urban Institute, Eric Toder, Institute Fellow, Urban Institute, and Lydia Austin,

Research Assistant, Urban-Brookings Tax Policy Center, “Taxing Carbon: What, Why, and How,” Tax Policy Center

6 — 15, p. 1]

The evidence supporting each of these claims is pretty persuasive. Coupled with arguments about the potential for the

creation of entire new industries and the purported benefits of either tax offsets or revenue reinvestment, these claims

provide solid grounding for a diverse array very strongly-warrant pro positions.

The con side of the proposition also has a number of potentially effective strategies it can deploy against carbon tax

proposals. Initially, one can contest the need for limits on fossil fuel use or greenhouse gas emissions. Many analystscontend that the alleged negative consequences of climate change are overblown, and there is a growing body of literature

suggesting that fossil fuel supplies are much more extensive than previously thought. Con teams can also argue that a

carbon tax would not achieve its goal of limiting fossil fuel use. There is solid evidence arguing that an array of

implementation problems would limit a tax’s ability to constrain emissions. These issues are magnified by the fact that pro

teams are limited to defending a domestic carbon tax. Although carbon tax defenders argue that a U.S. policy will be

modeled, there is strong reason to believe that other countries will not constrain their emissions just because the U.S. does

In fact, a U.S. tax will likely encourage energy-intensive industries to move to other countries. This “leakage” may have

the net effect of increasing overall greenhouse gas emissions. If one accepts the desirability of cutting fossil fuel use, there

are also a wide array of other policy options aside from a carbon tax, as discussed above. Any of these other tactics could

form the basis of a strong set of con arguments. Finally, most critics argue that a carbon tax would have devastating

effects on the U.S. economy, especially in the short-term. The economic case against a carbon tax is succinctly

summarized by Derrick Morgan of the right-leaning Heritage Foundation:

Supporters of a new carbon tax are using arguments aimed at conservatives (it can be revenue neutral) and liberals (it

can help the environment) alike. But even if one concludes that carbon dioxide and other greenhouse gases are leading

to increased temperatures — and there is robust debate and far from a public consensus on the magnitude of man-made

warming, particularly among conservatives — a carbon tax would (1) do next to nothing to lower global temperature,

(2) harm American manufacturing competitiveness, (3) create a new revenue stream based on behavior modification,

and (4) harm low-income Americans. Energy supplies can be delivered and new supplies created through the private

sector rather than through mandates, regulations, taxes, and subsidies ordered by government. [Derrick Morgan, Vice


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President, Domestic and Economic Policy, Heritage Foundation, “A Carbon Tax Would Harm U.S. Competitiveness

and Low-Income Americans Without Helping the Environment,” BACKGROUNDER n. 2720, 8— 21 — 12,

www.heritage.org/research/reports/2012/08/a-carbon-tax-would-harm-us-competitiveness-and-low-income-

americans-without-helping-the-environment, accessed 1-3-16].

The negative effects of a carbon tax would be most strongly felt by lower-income persons, who spend a larger proportion

of their earnings on energy, raising significant equity concerns. There is very strong evidence arguing that offset- or

revenue neutral-approaches to a carbon tax would fail to address the economic problems associated with artificiallyinflating energy prices. Each of these arguments is addressed “topshelf” section and has extensive backing in the

extension blocks.

This is a interesting, timely, and well-balanced topic. We hope that enjoy learning and debating about it.

Best of luck!


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Carbon Tax: Definitions and Descriptions [cont’d]

4. Carbon taxes defined, with rationale

Stephen Sewalk, Assistant Professor, Daniels College of Business, University of Denver, “A Carbon Tax with Reinvestment is WTO

Compatible,” FORDHAM ENVIRONMENTAL LAW REVIEW v. 25, 3— 14, p. 376.

A carbon tax has primarily been structured as a tax on energy, that is, carbon based fuels that emit GHG. Effectively, a carbon tax only

taxes emissions from burning fossil fuels. The intention of the tax is to internalize the externality so common emission producers pay the

true market cost. Currently, carbon taxes others have proposed are only applied on fossil fuels, and not on all GHG emissions. This tax is

imposed on any imported fossil fuels. Any imports taxed need to be taxed at the same rate as the internal tax rate. This tax is imposed

upstream, or imposed at the time the fossil fuel is extracted. The typical revenue structure of carbon tax proposals is to be revenue

neutral. First, the tax may be structured to decrease the need to raise revenue in other ways, for example, by decreasing the income tax

rate. This would be one monetary incentive for consumers to implement the tax. Another method that may be used to create a revenue

neutral tax is to have the tax be reimbursed to those consumers hardest hit by the tax. Determining which method is the most efficient is

outside of the scope of this paper, however, if a carbon tax is to be put into place, this issue would need to be addressed.

5. Carbon taxes defined

NERA Economic Consulting, ECONOMIC OUTCOMES OF A U.S. CARBON TAX, National Association of Manufacturers, 2 — 26 —

13, p. 1.

A carbon tax is a tax imposed on CO2 and possibly other greenhouse gas emissions. Emissions of CO2 are due largely to the combustionof fossil fuels in electricity production, transportation, heating, and various industrial and commercial processes. To reduce the

administrative difficulties of monitoring CO2 emissions and collecting the tax, the most direct method is to impose the tax “upstream”

on producers of fossil fuels — including coal, natural gas, and various petroleum products —rather than “downstream” on the emissions

themselves. Thus, a carbon tax would increase the cost of fossil fuels, leading to increases in costs to consumers and businesses as well

as other economic impacts. The increased costs due to a carbon tax would encourage companies to switch to lower-emitting fuels and

would lead households and companies to reduce energy use. The net effect of these changes due to the carbon tax would be to reduce

CO2 emission. The greater the carbon tax, the larger these effects would be and thus the greater the reductions in CO2 emissions would

be.


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Carbon Tax Desirable: Topshelf

1. Carbon taxes provide multiple benefits — the current drop in prices gives us a window to implement them

Lawrence Summers, Professor and past President, Harvard University, “Oil’s Swoon Creates the Opening for a Carbon Tax,”

WASHINGTON POST, 1 — 4 — 15, www.washingtonpost.com/opinions/oils-swoon-creates-the-opening-for-a-carbon-

tax/2015/01/04/3db11a3a-928a-11e4-ba53-a477d66580ed_story.html, accessed 1-2-16.

The case for carbon taxes has long been compelling. With the recent steep fall in oil prices and associated declines in other energy

prices, it has become overwhelming. There is room for debate about the size of the tax and about how the proceeds should be deployed.

But there should be no doubt that, given the current zero tax rate on carbon, increased taxation would be desirable. The core of the case

for taxation is the recognition that those who use carbon-based fuels or products do not bear all the costs of their actions. Carbon

emissions exacerbate global climate change. In many cases, they contribute to local pollution problems that harm human health. Getting

fossil fuels out of the ground involves both accident risks and environmental challenges. And even with the substantial recent increases

in U.S. oil production, we remain a net importer. Any increase in our consumption raises our dependence on Middle East producers. All

of us, when we drive our cars, heat our homes or use fossil fuels in more indirect ways, create these costs without paying for them. It

follows that we overuse these fuels. Advocating a carbon tax is not some kind of argument for government planning; it is the logic of the

market: That which is not paid for is overused. Even if the government had no need or use for revenue, it could make the econ omy

function better by levying carbon taxes and rebating the money to taxpayers. While the recent decline in energy prices is a good thing in

that it has, on balance, raised the incomes of Americans, it has also exacerbated the problem of energy overuse. The benefit of imposing

carbon taxes is therefore enhanced.

2. We should implement a carbon tax — is a fair and efficient way to address global warming

NEW YORK TIMES, Editorial, “The Case for a Carbon Tax,” 6— 6 — 15, www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbon-

tax.html?_r=0, accessed 1-6-16.

A carbon tax would raise the price of fossil fuels, with more taxes collected on fuels that generate more emissions, like coa l. This tax

would reduce demand for high-carbon emission fuels and increase demand for lower-emission fuels like natural gas. Renewable sources

like solar, wind, nuclear and hydroelectric would face lower taxes or no taxes. To be effective, the tax should also be applied to imported

goods from countries that do not assess a similar levy on the use of fossil fuels. Many countries already have some version of carbon

taxes. In the United States, for example, federal and state taxes on gasoline and diesel, which are used to pay for road and transit

projects, are effectively carbon taxes. But at the federal level, those taxes have not been increased since 1993, which has eroded their

effectiveness. Revenue generated by carbon taxes could be used for a variety of purposes. A lot of the money should surely be given to

households, especially the poorest, through tax credits or direct payments to offset the higher prices they would have to pay for gasoline,

electricity and other goods and services because of the tax. Some of the money could be used to invest in renewable energy and publictransportation, or to lower other taxes. British Columbia started phasing in a carbon tax in 2008 and used the revenue to reduce income

taxes. The province’s fossil fuel use fell after the tax was put in place, even as fuel consumption increased in the rest of Canada, and the

economy of British Columbia has grown faster than that of the rest of the country. The tax is currently capped at 30 Canadian dollars per

ton of carbon, or about 24 cents per gallon of gasoline. A carbon tax would also be much easier to administer than some of the other

climate change policies that many leaders, including President Obama and Gov. Jerry Brown of California, have backed. One of those

policies is cap-and-trade, an approach that limits overall emissions and allows businesses to buy and sell permits that entitle them to emit

carbon dioxide and other greenhouse gases. The United States used cap-and-trade successfully in the 1990s to reduce the pollution that

causes acid rain. But a European Union trading system for greenhouse gas emissions has not been as effective. Even energy companies

like Exxon Mobil that did not sign the letter have previously said they can support a carbon tax if lawmakers cut other taxes by an equal

amount. In addition, oil companies in Alberta, the home of Canada’s tar sands, have endorsed a carbon tax. Exxon Mobil and other large

energy companies potentially stand to benefit from a carbon tax, because a tax on emissions would force many electric utilities to use

more natural gas, which those businesses produce. Of course, getting lawmakers to adopt a carbon tax will be difficult. In the United

States, many Republican lawmakers, the coal-mining industry and politically powerful corporations like Koch Industries oppose it. Justlast year, Australia repealed its carbon tax after a new conservative government came to power. But world leaders, who will meet in

Paris later this year to negotiate a climate change agreement, cannot give up in the face of this opposition. Carbon taxes are one of the

best policies available to solve this global problem.


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Carbon Tax Desirable: Topshelf [cont’d]

3. Carbon taxes can boost the economy, address the deficit, and cut emissions

Richard Caperton, Director, Clean Energy Investment Program, “A Progressive Carbon Tax Will Fight Climate Change and Stimulate

the Economy,” Center for American Progress, 12— 6 — 12, www.americanprogress.org/issues/green/report/2012/12/06/47052/a-

progressive-carbon-tax-will-fight-climate-change-and-stimulate-the-economy/, accessed 1-1-16.

America is currently on the right path. Our greenhouse gas pollution is lower than it’s been in recent history, and our economy is starting

to see more signs of life. Neither of these positive trends, however, is anywhere close to where we need them to be to fully address thechallenges of climate change and economic growth. Even worse, our country must make additional significant changes to reduce our

substantial budget deficit so future generations aren’t stuck with the bill for our expenses. These issues— climate change, economic

growth, and fiscal responsibility — may not appear to be intimately linked. They all have different causes, and they impact our country in

different ways. They are, however, inextricably tied together by their solution: A price on carbon can make a significant contribution to

solving each of these challenges. This issue brief has explored some of the critical questions in designing a carbon tax, which is the most

likely way that carbon will be priced in the near future. There are certain ingredients that a carbon tax must include to be part of a

progressive vision for the United States: It must reduce greenhouse gas pollution, drive new investments in infrastructure, minimize

harm to vulnerable consumers and businesses, and reduce the deficit.

4. Carbon tax is best — would produce immediate results, generates funds for research

Reuven S. Avi-Yonah, Professor, Law, University of Michigan and David M. Uhlmann, Professor, Law, University of Michigan,

“Combating Global Climate Change: Why a Carbon Tax Is a Better Response to Global Warming than Cap and Trade,” STANFORD

ENVIRONMENTAL LAW JOURNAL V. 28 n. 3, 2009, pp. 3-50, p. 6-7.A more efficient and effective market-based approach to reduce carbon dioxide emissions would be a carbon tax imposed on all coal,

natural gas, and oil produced domestically or imported into the United States. A carbon tax would enable the market to account for the

societal costs of carbon dioxide emissions and thereby promote emission reductions, just like a cap and trade system. A carbon tax

would be easier to implement and enforce, however, and simpler to adjust if the resulting market-based changes were either too weak or

too strong. A carbon tax also would produce revenue that could be used to fund research and development of alternative energy and tax

credits to offset any regressive effects of the carbon tax. Because a carbon tax could be implemented and become effective almost

immediately, it would be a much quicker method of reducing greenhouse gas emissions than a cap and trade system. In addition, because

a carbon tax could be effective in advance of any international treaty regarding greenhouse gas emissions, a carbon tax would provide

the United States much needed credibility in the negotiations over international carbon dioxide limits. A carbon tax could then

supplement an international cap and trade system, combine with emission caps in an international hybrid "cap and tax" approach, or

become the focal point for the next international treaty to address global climate change.

5. Good policy design will allow us to check the negative effects of a carbon tax on energy intensive industries

Joseph E. Aldy, Visiting Fellow, Timothy J. Brennan, Senior Fellow, Dallas Burtraw, Senior Fellow, Carolyn Fischer, Senior Fellow,

Raymond J. Kopp, Co-Director, Molly K. Macauley, Vice President or Research, Richard D. Morgenstern, Senior Fellow, Karen L.

Palmer, Research Director, Anthony Paul, Center Fellow, Nathan Richardson, Visiting Fellow and Robert C. Williams III, Director,

Academic Programs, “Considering a Carbon Tax: Frequently Asked Questions,” Resources for the Future, 11— 2 — 12,

www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16.

A carbon tax could raise costs for industries that consume large amounts of energy, but some sectors are better positioned to recover the

cost increases than others. In sectors that are both energy-intensive and exposed to international trade, such as metals and chemicals,

product prices are driven by international market forces. Such industries could be disproportionately burdened if a carbon tax affects

their operations but not those of their international competitors. Also, some environmental benefits could be eroded if increases in U.S.

manufacturing costs cause economic activity and carbon emissions to “leak” to nations with weaker or nonexistent carbon-pricing

policies (see question #9 for more information about carbon leakage). Effects on industry (production and employment) depend on a

number of factors, including the carbon intensity of producers, the degree to which they can pass costs to consumers, their ability tosubstitute with less carbon-intensive energy, the strength of competition from imports, and consumers’ ability to substitute other, less

carbon-intensive alternatives. Various policy options may help offset these impacts. For example, because these industries tend to be

capital-intensive, lowering capital taxes or enhancing depreciation allowances could reduce their costs. However, these measures are not

usually well-targeted. Another option is to reduce the burden of the carbon tax in these sectors. The challenge is to do so in a way that

does not undo the incentives for reducing carbon intensity or seem to offer direct subsidies that violate World Trade Organization

obligations. Another option is to give firms a tax rebate based on their output. Per-output emissions above a sector-specific baseline

would generate a tax liability, and emissions below the baseline would generate a refund. This would preserve most incentives for

emissions reductions while reducing the overall tax burden. It makes the tax more complex, however, possibly creating opportunities for

tax avoidance, rent seeking, or protectionism. This approach must be carefully designed and preferential treatment must be phased out as

trade partners undertake their own climate regulations.


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Carbon Tax Desirable: Air Pollution

- A carbon tax will produce significant benefits from cuts in non-CO2 forms of pollution

Donald Marron, Institute Fellow, Urban Institute, Eric Toder, Institute Fellow, Urban Institute, and Lydia Austin, Research Assistant,

Urban-Brookings Tax Policy Center, “Taxing Carbon: What, Why, and How,” Tax Policy Center 6— 15, p. 5.

Climate change is not the only harm associated with burning fossil fuels. Power plants, factories, vehicles, and other sources also emit

air pollutants that directly harm human health, including fine particulate matter, sulfur dioxide, and nitrogen oxides. Vehicle use also

imposes other external costs, including congestion, road damage, and accidents. Taxing carbon will reduce these non-climate harms. In

principle, those harms should be addressed by policies specifically designed to reduce them, and climate benefits would be the rationale

for a carbon tax. As of yet, however, those other harms are incompletely or imperfectly addressed. As a result, a carbon tax would

generate “co- benefits”— improvements in human health and well-being unrelated to climate concerns. The magnitude of those co-

benefits depends on several factors, including the prevalence and value of potential health improvements (e.g., reduced asthma,

bronchitis, heart attacks) and the scope of benefits included (e.g., just air pollution from fossil fuels or also congestion and accidents that

result from driving). In a comprehensive analysis including both air pollution and vehicle externalities, Parry, Veung, and Heine estimate

that the co-benefits of a carbon tax in the United States would be about $35 per ton. In a narrower analysis of the co-benefits from its

proposed regulations on power plants, the EPA estimates that the co-benefits of reduced air pollution are at least as large as potential

climate benefits. These estimates thus suggest that, in the absence of new policies addressing those harms, a substantial carbon tax would

improve US well-being even if we give no weight to climate change.


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Carbon Tax Desirable: Budget Deficit / Revenue

1. A modest carbon tax would raise enormous revenues





www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16.

The amount of revenue raised depends on the level of the tax, how broadly it is applied, and other factors. Most experts suggest a tax of

around $25 per ton of CO2, which would raise approximately $125 billion annually. To put this in context with current considerations on

other issues: * Eliminating the home mortgage interest deduction would raise an average of $120 billion annually from 2013 to 2017. *

Eliminating the tax deduction for employer payments for health insurance would raise an average of $337 billion annually from 2013 to

2017. * Foregoing a “fix” to the Alternative Minimum Tax would save an average of $239 billion from 2013 to 2021. * The Budget

Control Act of 2011 imposes automatic cuts (“sequestration”) of $55 billion annually in defense spending and $36 billion in

discretionary domestic spending from 2013 to 2021. * Financing the current 2 percent reduction in payroll taxes paid by workers

requires about $110 billion annually.

2. Carbon taxes can be used to cut the deficit

Richard Caperton, Director, Clean Energy Investment Program, “A Progressive Carbon Tax Will Fight Climate Change and Stimulatethe Economy,” Center for American Progress, 12— 6 — 12, www.americanprogress.org/issues/green/report/2012/12/06/47052/a-

progressive-carbon-tax-will-fight-climate-change-and-stimulate-the-economy/, accessed 1-1-16.

The money remaining after funding these measures should be used for deficit reduction. The total amount of money available for deficit

reduction depends on how much of the economy is covered by the tax, but it will likely be substantial. For instance, a $25-per-ton tax on

power plants, which were responsible for about 2.2 billion tons of carbon dioxide in 2010, would generate $55 billion per year. Even

after protecting low-income consumers and investing in infrastructure, billions of dollars could be left over to help address our nation’s

debt. Cutting the deficit reduces the amount of interest future generations will have to pay on our national debt, which frees up resources

for more valuable uses.

3. Carbon taxes are better at raising revenue and are can be put into place much more quickly

Alex Rice Kerr , staff, “Why We Need a Carbon Tax,” ENVIRONS: ENVIRONMENTAL LAW AND POLICY JOURNAL v. 34, Fall

2010, p. 93-94.Other major benefits of a carbon tax include quicker implementation and the ability to raise revenue. In terms of speed, the government

could implement a carbon tax to take immediate effect, making it a much quicker method of reducing greenhouse gas emissions than a

cap-and-trade system. A quick response is critical, as numerous commentators warn that the planet sits at a pivotal moment where

immediate action may be necessary to prevent abrupt climate change. A cap-and-trade system would cause undue delay because it

requires time-consuming efforts in scientific inquiry and policy making. Furthermore, because cap-and-trade lacks transparency, it

would not pro-vide a clear, stable price signal to influence investment decision-making until years down the road, possibly 2020. A

quick restoration of United States' credibility in the global environmental discussions is another benefit of a speedy response to climate

change. Because a carbon tax could be effective before the next international treaty on greenhouse gas emissions, the United States could

come to the table with a seriousness that is tantamount to the task at hand. Additionally, an in-place tax would bring practical experience

and a focal point to the next round of international talks.

4. The revenues could be directed towards a number of socially-desirable purposes

Joseph E. Aldy and Robert N. Stavins, staff, “The Promise and Problems of Pricing Carbon: Theory and Experience,” DISCUSSION

PAPER, Resources for the Future, 10 — 11, p. 4-5.

The effects of a carbon tax on emission mitigation and the economy will depend in part on the amount and use of the tax revenue. For

example, an economy‐wide U.S. carbon tax of $20 per ton of CO2 would likely raise more than $100 billion per year. The carbon tax

revenue could be put toward a variety of uses. It could allow for reductions in existing distortionary taxes on labor and capital, thereby

stimulating economic activity and offsetting some of a policy’s social costs (Goulder, 1995; Goulder and Parry, 2008). Other social ly

valuable uses of revenue include reduction of debt, and funding desirable public programs, such as research and development of climate‐

friendly technology. The tax receipts could also be used to compensate low‐income households for the burden of higher energy prices, as

well as compensating others bearing a disproportionate cost of the policy.


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Carbon Tax Desirable: Budget Deficit / Revenue [cont’d]

5. Carbon taxes will improve our overall budget situation

Adele C. Morris, Brookings Institution and Aparna Mathur, American Enterprise institute, A CARBON TAX IN BROADER U.S.

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 5 — 14, p. vi.

A well-designed carbon tax could improve the long-run U.S. fiscal situation while reducing emissions. For example, estimates suggest

that a tax on the carbon content of fuels in the energy sector that started at $16 per ton of carbon dioxide in 2014 and rose at 4 percent

over inflation per year would raise more than $1.1 trillion in the first 10 years and more than $2.7 trillion over a 20-year period. A

broader tax base that included emissions of other greenhouse gases (e.g., non-energy carbon dioxide and methane) would raise even

more revenue. The long-term revenue and emissions reductions would depend on a host of hard-to-predict factors such as economic

growth and the evolution of energy technologies.

6. Carbon taxes would help us balance the budget

Ralph Nader , consumer advocate, “The Best Solution for Climate Change is a Carbon Tax,” REUTERS, 1— 4 — 13,

http://blogs.reuters.com/great-debate/2013/01/04/the-best-solution-for-climate-change-is-a-carbon-tax/, accessed 1-1-16.

According to the world authority on the subject, the Intergovernmental Panel on Climate Change, a carbon tax on GHGs of $50 p er

metric ton of CO2 equivalents would be a good first step. With annual emissions of 6.8 billion metric tons of CO2 equivalents, the

United States would collect $340 billion each year. With revenue like that, a carbon tax could be used to help balance the budget. The

policies discussed in the fiscal cliff debate were comparatively instructive. For example, extending the Bush tax cuts to all but the top 2 percent – as President Obama has suggested – would cost $171 billion each year in lost revenue. Preventing cuts to nondefense spending

would cost $55 billion. Continuing to pay unemployment benefits would cost $26 billion. A carbon tax would pay for all of this and then

some.

7. A carbon tax will raise substantial revenues — CBO analysis proves

Donald Marron, Institute Fellow, Urban Institute, Eric Toder, Institute Fellow, Urban Institute, and Lydia Austin, Research Assistant,

Urban-Brookings Tax Policy Center, “Taxing Carbon: What, Why, and How,” Tax Policy Center 6— 15, p. 9.

A carbon tax could raise a substantial amount of revenue. How much depends on the level and breadth of the tax and how producers and

consumers respond to it. Most proposals would ramp up the tax rate over time to allow people to adjust and to reflect the rising social

cost of carbon; revenue growth will depend on how fast the rate increases. Revenue projections also vary based on model assumptions.

Models that assume a faster adjustment to the tax typically foresee less revenue growth (but larger emissions reductions). Estimates of

carbon tax revenues thus vary widely. For legislative purposes, the most important estimates are those of the Congressional scoringagencies, the Joint Committee on Taxation, and the Congressional Budget Office. In late 2013, they estimated the revenue effects of a

tax on most greenhouse emissions starting at $25 per ton and increasing 2 percent faster than inflation. Scaling those estimates to CBO’s

latest budget projections, they imply net revenue of about $90 billion in its first complete year and about $1.2 trillion over its first decade

(table 2).

8. Carbon taxes will raise substantial revenues

Adele C. Morris, Brookings Institution and Aparna Mathur, American Enterprise institute, A CARBON TAX IN BROADER U.S.

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 5 — 14, p. 4.

Second, a carbon tax can raise significant revenue over at least several decades. How much revenue depends on the tax rate and how

quickly emissions fall. For example, estimates suggest that a price on carbon starting at about $16 per ton of CO2 in 2014 and rising at 4

percent over inflation would raise over $87 billion in the first year and increase to over $190 billion per year 20 years later. The revenue

would continue to increase through the following two decades or so, but eventually the decline of the tax base (i.e., emissions) wouldoutpace the increase in the tax rate, and total revenue would fall. Such a decline in revenue could be a fiscal concern but it would also

signal the environmental success of the program.


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Carbon Tax Desirable: Budget Deficit / Revenue [cont’d]

9. Carbon taxes would generate substantial revenues



ENVIRONMENTAL LAW JOURNAL V. 28 n. 3, 2009, pp. 3-50, p. 40.

A carbon tax by definition generates revenue. A relatively modest tax of $10 per ton of carbon content is estimated to generate $50

billion per year; the America's Energy Security Trust Fund Act envisages a tax of $16.50 per ton and generates correspondingly more

revenue.' While. the current federal budget deficit and even larger actuarial deficit may justify revenue raising measures in general,

revenues from a carbon tax should be segregated and devoted to addressing any regressive effects of the tax and reducing greenhouse

gas emissions. Some carbon tax proposals promise "revenue neutrality" and focus on eliminating regressive effects.


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Carbon Tax Desirable: Business Confidence / Predictability

1. Businesses prefer a carbon tax — predictability

NEW YORK TIMES, Editorial, “The Case for a Carbon Tax,” 6— 6 — 15, www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbon-

tax.html?_r=0, accessed 1-6-16.

In a welcome development, businesses are asking world leaders to do more to address climate change. This week, the top executives of

six large European oil and gas companies called for a tax on carbon emissions. These companies — the BG Group, BP, Eni, Royal

Dutch Shell, Statoil and Total — are not taking a bold environmental stand. They are being pragmatic. They want an efficient and

predictable policy to limit greenhouse gas emissions because they realize something must be done. Numerous scientists, economists,

environmentalists and political leaders have previously proposed similar ideas.

2. Carbon taxes are superior — business certainty

Alex Rice Kerr , staff, “Why We Need a Carbon Tax,” ENVIRONS: ENVIRONMENTAL LAW AND POLICY JOURNAL v. 34, Fall

2010, p. 93.

Another characteristic that makes a carbon tax attractive is the predictability and transparency it offers to private investors. Unlike a cap-

and-trade market where carbon allowances could experience extreme volatility, a tax provides long-term predictability for the price of

emissions. Such a market constant would provide a steady benchmark against which new technologies must compete. Companies could

implement more effective long-range plans for investing in the best technologies that reduce emissions. Furthermore, a carbon tax could

be more predictable if the tax was self-adjusting and could counteract fluctuations in the price of carbon. The tax could conceivably beheld in trust to ensure consistency and avoid politically motivated adjustments. Despite offering a steady carbon price, a car-bon tax

would still allow regulators to adjust the rate relatively easily if the price signal was understood to be too weak or too strong.

3. Carbon taxes are preferred by businesses — cost certainty



ENVIRONMENTAL LAW JOURNAL V. 28 n. 3, 2009, pp. 3-50, p. 42.

A carbon tax ensures Cost Certainty: the cost is the amount of the tax, and whatever the incidence of the tax (i.e., whether it can be

passed on to consumers or not), the cost cannot rise above the tax rate. This enables businesses to plan ahead, secure in the knowledge

that raising the tax rate beyond any automatic adjustment, which can be planned for, requires another vote in Congress that they can

hope to influence.

4. Businesses — including Big Oil — see climate action as inevitable, and prefer the predictability of a carbon tax

Tim McDonnell, journalist, “A Bold Plan to Burn Less,” SLATE, 6— 4 — 15,

www.slate.com/articles/health_and_science/climate_desk/2015/06/european_oil_companies_endorse_price_on_carbon_emissions_carbo

n_tax_or_cap.html, accessed 1-9-16.

If Monday’s letter is any clue, oil companies are reading the writing on the wall, and they know that one way or another, it’s time to start

planning for a future when carbon pollution is more expensive and tightly regulated. Well, some oil companies: Conspicuously absent

from the letter are any U.S. oil companies, such as Chevron or ExxonMobil; all the signatories are European. In fact, just last week

Exxon chief Rex Tillerson implicitly blasted his European peers for cozying up to the United Nations on climate issues, saying his

company wouldn’t “fake it” on climate change and that investing in renewable energy is tantamount to choosing to “lose money on

purpose.” The head of French oil giant Total addressed the cross-Atlantic schism in comments to Reuters, saying that the European

com panies were set on throwing their weight behind carbon pricing “without necessarily waiting for an American to come on board.”

Although carbon pricing “obviously adds a cost to our production and our products,” the letter said, the companies would pref erconsistency and predictability over the patchwork of policies that exists now. In other words, it’s easier to justify and plan investments in

lower-carbon projects, such as replacing coal with natural gas, when carbon prices are stable and “even-handed,” the letter said. At the

same time, these companies have come under increasing pressure from shareholders to address how they’ll stay profitable in the future,

as restrictions on carbon emissions are tightened.


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Carbon Tax Desirable: Economy — Topshelf

The efficient cycling of tax revenues means a well-designed carbon tax can actually boost economic growth





www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16.A carbon tax could lead to overall economic growth, if the tax revenues are used in a way that promotes economic growth, such as cutting other

taxes or reducing the deficit. Reducing personal and corporate income taxes would promote growth because these taxes distort employment,

savings, and investment. The $125 billion in annual revenues from a $25/ton carbon tax could allow federal personal income tax reductions of

about 15 percent or corporate income tax reductions of about 70 percent, if all carbon tax revenues were used to replace current tax revenues.

Alternatively, the federal deficit could be reduced by approximately $1.25 trillion over 10 years — about the same reduction that the 2011 Joint

Select Committee on Deficit Reduction would have had to agree on to avoid mandatory spending cuts. Other ways that the revenue could be

used to promote growth include funding essential infrastructure, basic research, or investments in human capital. Any of these uses — funding tax

cuts, deficit reduction, or productive government spending — could promote growth.

2. A well-designed carbon tax will create jobs and boost the economy — multiple reasons

Rick McGahey, Milano School of International Affairs, Management and Urban Policy, New School, “A Carbon Tax Will Create Jobs

for Americans,” CNN, 10— 3 — 14, www.cnn.com/2014/10/03/opinion/mcgahey-climate-change/, accessed 1-10-16.Critics of climate action like to say that helping our environment would hurt our economy. Climate-change denier Sen. Jim Inhofe has written

that "manmade catastrophic global warming was the greatest hoax ever perpetrated on the American people" and that cap-and-trade legislation

could cause the loss of over 4 million jobs. Inhofe's views matter since he could become the new chairman of the Committee on Environment

and Public Works if Republicans win the Senate in the November elections. But three new studies show climate action can improve the

economy and create jobs. Though transitioning to clean energy future will cause some disruption, unchecked environmental damage would

cause catastrophic economic loss. So how can climate action help economy? Business leaders and economists said in a report that new

technologies can spur both economic growth and better climate outcome. Finance experts at the International Monetary Fund -- hardly a bunch

of tree-huggers -- made a similar point. In their paper about carbon pricing, they concluded that higher carbon prices can benefit individual

countries even if others don't match them. U.N. tackles climate change Airlines united to reduce climate impact Obama: No nation immune to

climate change Photos: Rallying to stop climate change Photos: Rallying to stop climate change And economist Robert Pollin and his colleagues

have shown that for every $1 million of investment in clean energy, the U.S. can create 16.7 jobs compared with only 5.3 jobs from fossil fuel

investments. Overall, green energy investments combined with carbon taxes can create 2.7 million jobs in areas such as renewable energy,

construction, manufacturing, transportation, new technologies and services -- even taking into account the transitional job loss from fossil fuel

industries. We should pay attention to these ideas. American energy policy is backwards. Federal and state governments give out over $20

billion in annual subsidies for fossil fuel exploration and production, which benefit highly profitable companies such as Exxon Mobil, Shell and

BP. But if the U.S. implements even a modest federal carbon tax, we could generate $170 billion by 2030 to create jobs and build bridges, roads

and schools, reduce budget deficits, and cut taxes to spur private investment. Without carbon taxes, we treat our environment -- air, oceans and

fresh water -- as a garbage dump where we fill up excess carbon. But the garbage can is overflowing because carbon emitters don't pay the full

price for carbon emissions. Think of it this way: It's like a bad neighbor who dumps garbage in the neighbors' yards. That person saves money,

but everyone else pays to clean up the foul mess and the entire neighborhood suffers. Just like with trash, carbon taxes must bear the full cost of

their negative effects. The first dollar of any carbon tax must help communities and workers in the transition to green economy. In fact, many

fossil fuel job losses already have taken place. West Virginia coal mining employment fell from 120,000 in 1950 to 25,000 by 2011. Carbon

taxes are not the real threat to coal miners and their communities -- greedy energy companies are. These companies make profit but leave fewer

jobs and harm communities. Compensation to job losers, paid from carbon tax revenues, can be modeled after federal programs such as the

Trade Adjustment Assistance for displaced trade workers or the Pentagon's program that helps communities that lose military bases. There are

successful policies that have reshaped market incentives to give clean energy and green jobs a fair chance. In 2011, Germany expanded wind

turbines and solar energy, aiming to replace all nuclear power. Thirty percent of the country's electricity is now derived from renewables.Germany's massive investments are driving down wind turbine and solar technology prices, making them more cost-effective. Los Angeles,

urged by an alliance of environmentalists, unions and community organizations, is changing a basic city service -- the commercial trash pickup -

- to cut emissions from garbage trucks, increase recycling and encourage industries to use recycled materials, to achieve a "zero waste" target by

2050. These new trash policies will also create better, safer and higher-paying jobs. So the economic cost of moving to a clean energy economy

is not anywhere near what the fear-mongering of Inhofe and others would have you believe. Instead, we can create jobs, help those who are in

transition, and save our precious common resource -- the planet where we all live. We just have to use our brains. As one marcher at the recent

People's Climate March aptly puts it in his protest sign: "Global Warming and No Jobs -- Two Problems, One Solution." There is only solution,

and we must embrace it.


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Carbon Tax Desirable: Economy — General

1. Carbon taxes will have numerous beneficial side effects

Charles Wheelan, senior lecturer, Rockefeller Center, Dartmouth College, “The Irrefutable Logic of a Carbon Tax,” U.S. NEWS &

WORLD REPORT, 2 — 18 — 14, www.usnews.com/opinion/blogs/charles-wheelan/2014/02/18/global-warming-and-why-a-carbon-tax-

is-a-no-brainer, accessed 1-1-16.

And if we’re not sick with global warming? Then raising the cost of carbon emissions would still have positive “side effects.” It would

reduce conventional pollution, reduce traffic congestion, reduce our dependence on energy from hostile parts of the world, promote

renewable energy and promote cleaner carbon-based fuels like natural gas over dirty ones like coal. Any kind of carbon tax would raise

government revenue that could substitute for revenue that we currently raise by taxing income, capital and savings. If we tax carbon,

people pollute less. If we tax income, people work less. There is not an economist I’ve ever met who pref ers the latter to the former.

2. Market-based approaches are best — spread the costs throughout the entire economy



ENVIRONMENTAL LAW JOURNAL V. 28 n. 3, 2009, pp. 3-50, p. 30-31.

In addition to pro

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