Washington, D.C. — Today, the Center for American Progress released a new report outlining how policymakers could craft a carbon tax that decarbonizes the economy, protects low- and middle-income energy consumers, and ensures continued economic growth. The plan would start with a tax of $30 per ton of carbon dioxide equivalent in 2020, increasing each year by 5.2 percent until it meets the social cost of carbon in 2030, which is currently set at $50. It would track the social cost of carbon from then on.
“It’s rare to find consensus these days, but economists on the left, right, and everywhere in between agree: Carbon pricing is the most efficient way to cut carbon pollution across the economy,” said Greg Dotson, Vice President for Energy Policy at CAP. “The Center for American Progress has thought through how to establish a price on carbon that achieves significant pollution reductions while protecting low- and middle-income households from any potential energy price increases. When Congress is ready to act on a comprehensive energy and climate policy, this progressive carbon tax proposal illustrates that policies are available to drive the nation’s economy forward in a sustainable manner.”
CAP proposes to return the revenue generated by a carbon tax in two ways: a lump sum return to Americans and a labor tax cut that recognizes the economic value of work. This approach has four distinct advantages:
- All households making less than $150,000 per year are protected from increases in direct energy and consumer costs. The lump sum rebate and labor tax cut are progressive and counteract the regressive nature of consumer price increases.
- It protects the poorest households from the impacts of other indirect costs and mitigates the impact for other households.
- The refundable labor tax cut lowers the overall effective tax rate on wages.
- The impact on national gross domestic product is minimal overall and is negligible when compared with the potential economic impact of unmitigated climate change.
The full report is available here.
For more information on this topic or to speak with an expert, contact Tom Caiazza at [email protected] or 202.481.7141.