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The Paradigm NSDA Public Forum Position Paper

February 2016
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Carbon Tax: Index

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

Carbon 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: EconomyTopshelf ................................................................................................... 22
Carbon Tax Desirable: EconomyGeneral ..................................................................................................... 23
Carbon Tax Desirable: EconomyJobs / Cost ................................................................................................ 24
Carbon Tax Desirable: EconomyOffsets ...................................................................................................... 25
Carbon Tax Desirable: EconomyAnswers to Competitiveness / Energy Key .......................................... 26
Carbon Tax Desirable: EffectiveInnovation ................................................................................................. 28
Carbon Tax Desirable: EffectiveMarket Signal ........................................................................................... 31
Carbon Tax Desirable: EffectiveOther Countries Prove .............................................................................. 32
Carbon Tax Desirable: EffectiveAnswers 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: MechanismGeneral ................................................................................................. 44
Carbon Tax Desirable: MechanismBorder Tariff ......................................................................................... 45
Carbon Tax Desirable: MechanismOffset / Revenue Neutral ...................................................................... 46
Carbon Tax Desirable: MechanismPhase-In ................................................................................................ 47
Carbon Tax Desirable: MechanismReinvestment ........................................................................................ 48
Carbon Tax Desirable: MechanismReinvestment (CCS) ............................................................................. 52
Carbon Tax Desirable: MechanismUpstream............................................................................................... 54
Carbon Tax Desirable: Multiwarrant / General ................................................................................................ 55
Carbon Tax Desirable: Politically Feasible ...................................................................................................... 57
Carbon Tax Desirable: WarmingGeneral ..................................................................................................... 58
Carbon Tax Desirable: WarmingEmissions Cuts (General) ......................................................................... 61
Carbon Tax Desirable: WarmingEmissions Cuts (Efficiency / Cost)........................................................... 63
Carbon Tax Desirable: WarmingHuman Caused ......................................................................................... 64
Carbon Tax Desirable: WarmingJustifies Action ......................................................................................... 66
Carbon Tax Desirable: WarmingReal .......................................................................................................... 69
Carbon Tax Desirable: WarmingAnswers to Leakage .............................................................................. 70
Carbon Tax Desirable: Answers to Alternatives (General) .......................................................................... 71
Carbon Tax Desirable: Answers to AlternativesCap-and-Trade (Comparative) ....................................... 73
Carbon Tax Desirable: Answers to AlternativesCap-and-Trade (Fails) ................................................... 79
Carbon Tax Desirable: Answers to AlternativesRegulations .................................................................... 82
Carbon Tax Desirable: Answers to AlternativesSubsidies ....................................................................... 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: Con

Carbon Tax Undesirable: Topshelf .................................................................................................................. 95
Carbon Tax Undesirable: AlternativesCAFE Standards .............................................................................. 98
Carbon Tax Undesirable: AlternativesCap-and-Trade (Topshelf) ............................................................. 100
Carbon Tax Undesirable: AlternativesCap-and-Trade (Comparative Evidence) ....................................... 101
Carbon Tax Undesirable: AlternativesCap-and-Trade (Cost Effective / Economy) ................................... 102
Carbon Tax Undesirable: AlternativesCap-and-Trade (Emissions Cuts) ................................................... 104
Carbon Tax Undesirable: AlternativesCap-and-Trade (Green Energy) ..................................................... 105
Carbon Tax Undesirable: AlternativesCap-and-Trade (Global Cuts)......................................................... 107
Carbon Tax Undesirable: AlternativesFree Markets .................................................................................. 109
Carbon Tax Undesirable: AlternativesGrowth Strategy ............................................................................. 111
Carbon Tax Undesirable: AlternativesInnovation / Tech Strategy ............................................................. 113
Carbon Tax Undesirable: AlternativesSubsidies ........................................................................................ 114
Carbon Tax Undesirable: Deforestation ......................................................................................................... 115
Carbon Tax Undesirable: EconomyGeneral ............................................................................................... 116
Carbon Tax Undesirable: EconomyCalibration Problems.......................................................................... 119
Paradigm Research 2015-2016
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Carbon Tax Undesirable: EconomyCapital Flight ..................................................................................... 120

Carbon Tax Undesirable: EconomyCarbon Spillover Benefits .................................................................. 121
Carbon Tax Undesirable: EconomyEnergy Prices ..................................................................................... 122
Carbon Tax Undesirable: EconomyExport Competitiveness ..................................................................... 123
Carbon Tax Undesirable: EconomyJobs .................................................................................................... 124
Carbon Tax Undesirable: EconomyMultiwarrant / General ....................................................................... 125
Carbon Tax Undesirable: EconomyTax Interactions ................................................................................. 126
Carbon Tax Undesirable: EconomyWages ................................................................................................ 127
Carbon Tax Undesirable; EconomyAnswers to Adaptation / Innovation ............................................... 128
Carbon Tax Undesirable: EconomyAnswers to Offsets / Neutrality ...................................................... 132
Carbon Tax Undesirable: EmpiricallyAustralia ......................................................................................... 135
Carbon Tax Undesirable: EmpiricallyBritish Columbia ............................................................................ 137
Carbon Tax Undesirable: EmpiricallyNorway ........................................................................................... 139
Carbon Tax Undesirable: Equity Concerns .................................................................................................... 140
Carbon Tax Undesirable: FailsGeneral ...................................................................................................... 143
Carbon Tax Undesirable: FailsEnforcement Problems .............................................................................. 144
Carbon Tax Undesirable: FailsPoliticization.............................................................................................. 145
Carbon Tax Undesirable: FailsAnswers 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: WarmingTopshelf ............................................................................................. 159
Carbon Tax Undesirable: WarmingCalibration Problems .......................................................................... 160
Carbon Tax Undesirable: WarmingCannot Cut Emissions Enough ........................................................... 162
Carbon Tax Undesirable: WarmingLeakage .............................................................................................. 163
Carbon Tax Undesirable: WarmingNo Warming Problem ........................................................................ 166
Carbon Tax Undesirable: WarmingOther Countries .................................................................................. 168
Carbon Tax Undesirable: WarmingAnswers to Insurance Policy ........................................................... 170
Carbon Tax Undesirable: WarmingAnswers 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
Carbon 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-caused
climate change and the recent breakthroughs in international negotiations over limits on the emission of greenhouse gases.
This months 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 resolutions focusa
carbon taxaccesses 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 Earths 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 Earths lower
atmosphere and surface. Without this natural greenhouse effect, the temperatures on the planets surface would be far
lower, 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 planets 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 globes
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 planets 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 Earths 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 of
the warming real / false debate. However, the bulk of our work is on the intricacies of a carbon taxyou 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 no
repercussions. 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 hydrocarbon 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 upstreamthat 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 emissionsfrom a specific sector or only large
sources of emissionscould 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, 11212,
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, risks 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
Feb PFCarbon Tax
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 todays 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, 112
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 revenueoffsets
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 we
can 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-andcontrol 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 capandtrade 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 highestvalued 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, 1011, 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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polluters allowances (for free) to pollute, and, if they do not need all of the allowances due to proactive efforts, they
can trade or sell them to other polluters. Polluters who are unable to reduce their GHG emissions below their
allocation, can then purchase these traded allowances. Based on this structure, a cap-and-trade system appears to
create a market between polluters in which the supply and demand of the allowances determines the price of
emissions (dollars per ton of CO2). By factoring in price and allowing the price to fluctuate to achieve the cap, the
cap-and-trade system is designed to reduce GHG emissions by allowing polluters to choose between investing to
reduce emissions or purchasing allowances. The goal is to bring about the most efficient processes that use less
energy and to create demand for cleaner forms of energy due to rising costs associated with emissions. [Stephen
Sewalk, Assistant Professor, Daniels College of Business, University of Denver, The EU-27, U.S., U.K., and China
Should Dump Cap-and-Trade as a Policy Option and Adopt a Carbon Tax with Re-investment to Reduce Global
Emissions, SUFFOLK UNIVERSITY LAW REVIEW v. 47, 2014, p. 539-540].
Although cap-and-trade schemes are not currently being debated in congress, they have been subjected to rigorous
analysis, and have been the focus of several legislative efforts aimed at addressing the challenges of climate change:
In a cap-and-trade program, a government agency establishes a limit, or cap, on regulated polluters' carbon emissions
and then allocates set numbers of emission allowances among them. Trading of these allowances determines the value
of allowances and creates a market between polluters. If targeted polluters surpass this cap, they must purchase
reduction credits from other regulated polluters who go below their assigned caps. A cap-and-trade program has been
the leading proposal for climate change legislation in the United States. The most recent cap-and-trade proposal was
the American Clean Energy and Security Act, also known as the Waxman-Markey bill. This bill was designed to
establish an emissions trading plan in the United States that would reduce carbon emissions and create clean energy
jobs. The Waxman-Markey bill was approved by the House of Representatives on June 26, 2009, but died in the
Senate in that same year. To date, the U.S. Congress has not passed any federal legislation on climate change.
However, political figures favor the idea of cap-and-trade because the cap-and-trade system is not called a "tax," and
the government can decide where to allocate emission allowances. Environmentalists favor this system for the
absolute quantity restrictions on carbon emissions. The money-making potential of a market-based program leads to
support from many industry groups. Groups supporting this type of program rely on the following assumptions of the
cap-and-trade system: (1) carbon emissions below a certain level (that level which is set by the assigned cap) do not
cause undue harm to the environment, and (2) a market in pollution allowances (the trade aspect) is "the most costeffective means of reducing pollution to the predetermined level... ." [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. 586-587]
A report from the Heritage Foundation (which is skeptical of any effort to limit greenhouse gas emissions) highlights
some of the major differences between a carbon tax and cap-and-trade:
Cap-and-trade and a carbon tax are two ways to limit greenhouse gas emissions. If planners knew the markets
behavior perfectly, then a cap-and-trade system and carbon tax could put the same price on emissions, achieving
exactly the same effectreduced emissions and higher prices for fossil fuelpowered energy and products. Planners
cannot know such information, so the proposals look to achieve different goals: A cap-and-trade system includes a
strict limit on the amount of GHGs emitted but unclear costs, while a carbon tax imposes higher known costs but
unclear emissions reductions. Under a cap-and-trade system, those who wish to emit must purchase an allowance by
auction or from others who have allowances to sell. In the WaxmanMarkey bill, for example, allowances would be
distributed to utilities (to soften the increase in rates), manufacturers (to protect domestic industry), and others,
including environmental groups that theoretically would use the proceeds to improve the environment. Other
allowances were to be auctioned to the highest bidder, thus revealing, in theory, how much the right to emit costs. A
carbon tax approaches the issues from a different perspective. In that system, the right to emit is not limited by
capping the amount of GHGs that are emitted. Instead, anyone who wishes to emit must pay a tax. Since it will be
more expensive to emit than before, GHGs will decline, albeit by an unknown amount: The higher the tax, the more
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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, 82112, www.heritage.org/research/reports/2012/08/acarbon-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 inspire
some 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 resulting
revenue could finance tax reductions, spending priorities, or deficit reduction policies that could offset the taxs
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
615, 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 analysts
contend 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 taxs 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 temperaturesand there is robust debate and far from a public consensus on the magnitude of man-made
warming, particularly among conservativesa 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, 82112,
www.heritage.org/research/reports/2012/08/a-carbon-tax-would-harm-us-competitiveness-and-low-incomeamericans-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 artificially
inflating 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

1. Carbon taxes defined and described
Joseph E. Aldy and Robert N. Stavins, staff, The Promise and Problems of Pricing Carbon: Theory and Experience, DISCUSSION
PAPER, Resources for the Future, 1011, p. 4.
In principle, the simplest approach to carbon pricing would be through government imposition of a carbon tax (Metcalf, 2007). The
government could set a tax in terms of dollars per ton of CO2 emissions (or CO2equivalent on greenhouse gas emissions) by sources
covered by the tax, or more likely a tax on the carbon content of the three fossil fuels (coal, petroleum, and natural gas) as they enter
the economy. To be costeffective, such a tax would cover all sources, and to be efficient, the carbon price would be set equal to the
marginal benefits of emission reduction, represented by estimates of the social cost of carbon (Interagency Working Group on Social
Cost of Carbon, 2010). Over time, an efficient carbon tax would increase to reflect the fact that as more greenhouse gas emissions
accumulate in the atmosphere, the greater is the incremental damage from one more ton of CO2. Imposing a carbon tax would provide
certainty about the marginal cost of compliance, which reduces uncertainty about returns to investment decisions, but would leave
uncertain economywide emission levels (Weitzman, 1974).
2. Carbon tax defined, with rationale

Michael J. Zimmer, attorney, Carbon Tax: Ready for Prime Time? SUSTAINABLE DEVELOPMENT LAW & POLICY v. 8, Winter
2008, p. 67.
A "carbon tax" is a tax on the carbon content of fuels; effectively, it is a tax on the CO[2] emissions produced from burning fossil fuels.
The current prices of gasoline, electricity, oil, coal, and other fuels do not include the full economic costs of the health, resource, and
environmental externalities associated with the broad usage of these energy sources in the United States and around the world. The
failure to force industry and consumers to shoulder these externalities suppresses the economic incentive to develop and implement
carbon-reducing measures like energy efficiency, renewable energy, advanced metering, storage, additional transmission, or clean
technology. On the other hand, taxing fuels based on their carbon content infuses these incentives at every point in the chain of
production and consumption, from an individual's choice of the type and usage of vehicles, appliances, and housing, to business choices
of product design, capital investment, facilities location, and government's choices when setting regulatory policy direction.
3. Carbon taxes defined

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, 11212,
www.rff.org/blog/2012/considering-carbon-tax-frequently-asked-questions, accessed 1-6-16.
A carbon tax is a tax imposed on releases of carbon dioxide (CO2), which is emitted largely through the combustion of fossil fuels used
in electricity production; industrial, commercial, and residential heating; and transportation. A carbon tax may be a tax per ton of carbon
or, more commonly, per ton of CO2. A $1 tax per ton of CO2 is equal to a $3.7 tax per ton of carbon because carbon constitutes roughly
3/11 of the weight of CO2. Because CO2 is usually the substance of interest rather than carbon itself, the usual meaning of a carbon
tax is a tax on CO2. The most common proposal for a carbon tax calls for the tax to start low and rise over time. There are many
options for how this tax would be applied, all of which have different impacts (on overall cost, effectiveness of raising revenue and
reducing CO2, etc.) depending on what is taxed, where the tax is implemented, and how the revenue is used.
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Carbon Tax: Definitions and Descriptions [contd]

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, 314, 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, 226
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 combustion
of 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 fuelsincluding coal, natural gas, and various petroleum productsrather 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 benefitsthe current drop in prices gives us a window to implement them
Lawrence Summers, Professor and past President, Harvard University, Oils Swoon Creates the Opening for a Carbon Tax,
WASHINGTON POST, 1415, www.washingtonpost.com/opinions/oils-swoon-creates-the-opening-for-a-carbontax/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 economy
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 taxis a fair and efficient way to address global warming
NEW YORK TIMES, Editorial, The Case for a Carbon Tax, 6615, www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbontax.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 coal. 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 public
transportation, or to lower other taxes. British Columbia started phasing in a carbon tax in 2008 and used the revenue to reduce income
taxes. The provinces 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 Canadas 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. Just
last 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 [contd]

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, 12612, www.americanprogress.org/issues/green/report/2012/12/06/47052/aprogressive-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 its 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 the
challenges of climate change and economic growth. Even worse, our country must make additional significant changes to reduce our
substantial budget deficit so future generations arent stuck with the bill for our expenses. These issuesclimate change, economic
growth, and fiscal responsibilitymay 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 bestwould 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
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 to
substitute 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 615, 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 cobenefits 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
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

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 nations
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

PAPER, Resources for the Future, 1011, 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 economywide 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 policys social costs (Goulder, 1995; Goulder and Parry, 2008). Other socially
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 lowincome 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 [contd]

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, 514, 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, 1413,
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 per
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 revenuesCBO analysis proves

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 scoring
agencies, 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 CBOs
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

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 514, 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) would
outpace 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 [contd]

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.
19
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Carbon Tax Desirable: Business Confidence / Predictability

1. Businesses prefer a carbon taxpredictability
NEW YORK TIMES, Editorial, The Case for a Carbon Tax, 6615, www.nytimes.com/2015/06/07/opinion/the-case-for-a-carbontax.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 superiorbusiness certainty

2010, p. 93.
Another characteristic that makes a carbon tax attractive is the predictability and transparency it offers to private investors. Unlike a capand-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 be
held 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 businessescost certainty

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. Businessesincluding Big Oilsee climate action as inevitable, and prefer the predictability of a carbon tax
Tim McDonnell, journalist, A Bold Plan to Burn Less, SLATE, 6415,
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 Mondays letter is any clue, oil companies are reading the writing on the wall, and they know that one way or another, its 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 wouldnt 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
companies 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 prefer
consistency and predictability over the patchwork of policies that exists now. In other words, its 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 theyll stay profitable in the future,
as restrictions on carbon emissions are tightened.
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Carbon Tax Desirable: Business Confidence / Predictability [contd]

5. Carbon taxes are effectivelock in cost certainty
Compatible, FORDHAM ENVIRONMENTAL LAW REVIEW v. 25, 314, p. 376-377.
Some of the advantages of a carbon tax include a set price for carbon leading to price certainty, which results in simplicity and easily
understanding the tax and allows the tax to be put in place quickly, decreases the likelihood of fraud. Another significant advantage of a
carbon tax over a cap-and-trade program is that the carbon tax would encourage a reduction in usage of carbon and direct the market
towards more renewable (clean) energy. The carbon tax would bring about price stability, as the industry would know (in advance) what
the tax rate would be, and therefore would consider the tax in making business decisions. This would create more certain and stable
markets, resulting in consistent action to reduce emissions rather than price volatility, leading to uncertainty and volatile market
responses as seen in the current cap-and-trade program of the European Union.
6. Cost certainties of carbon taxes are gooddrive efficiency and clean energy investments
The cost certainty implicit in a carbon tax could also be very useful in driving investments in efficiency and new clean technologies. For
long-lived assets such as power plants and factories, knowing what the cost of carbon will be in the future makes planning those
investments much easier. A carbon tax will also incentivize the use of non-fossil-fuel-based energy, causing an economic boost in the
green-jobs and clean-tech markets. There are two important sides to a carbon tax: how the revenue is collected and where the revenue
goes. Getting the right mix of policies on both sides of the equation will ultimately determine whether or not a carbon tax achieves the
aforementioned goals.
7. Carbon taxes are effectiveprice predictability

2008, p. 68.
A carbon tax sets a market clearing price that encourages predictable energy prices. Predictability is important be-cause when future
energy and power prices can be reliably calculated in advance, energy-critical decisions can be made with the full awareness of carbon
price signals. Once these price signals are added to the costs that industry must factor into the cost of doing business, they can affect
plant and building design considerations, new clean technology development, electricity storage and deployment for industry, and
appliance selection and the purchase of the family car for the individual. The United States has had tradable permits for sulfur dioxide
("SO[2]") since the enactment of the Clean Air Act Amendments of 1990. In that period, the tradable permits have varied in price by
over forty percent. Yet due to carbon's higher relative market penetration within the United States and global economy, compared to that
of SO[2], similar price fluctuations would likely affect all aspects of the U.S. economy, including consumer spending, budgeting, capital
expansion, and inflation.
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Carbon Tax Desirable: EconomyTopshelf

The efficient cycling of tax revenues means a well-designed carbon tax can actually boost economic growth
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 yearsabout 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 usesfunding tax
cuts, deficit reduction, or productive government spendingcould promote growth.
2. A well-designed carbon tax will create jobs and boost the economymultiple reasons
Rick McGahey, Milano School of International Affairs, Management and Urban Policy, New School, A Carbon Tax Will Create Jobs
for Americans, CNN, 10314, 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: EconomyGeneral

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, 21814, www.usnews.com/opinion/blogs/charles-wheelan/2014/02/18/global-warming-and-why-a-carbon-taxis-a-no-brainer, accessed 1-1-16.
And if were 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 Ive ever met who prefers the latter to the former.
2. Market-based approaches are bestspread the costs throughout the entire economy
In addition to promoting cost-effective solutions, market-based limits allow the significant costs of carbon dioxide emission reductions
to be distributed more evenly across the economy. Any carbon mitigation strategy will have economic impacts," and no approach can
eliminate all disproportionate effects, but a market- based strategy is likely to allow costs to be shared most equally, because it affects
the entire economy. Finally, a market-based approach can be implemented more rapidly than the regulatory approaches described above,
particularly if a carbon tax is utilized.
3. A carbon tax would, at worst, only have modest negative effects on the economy
Eli Lehrer, President, R Street Institute, A Practical Approach to Climate Change, NATIONAL AFFAIRS n. 24, Summer 2015,
www.nationalaffairs.com/publications/detail/a-practical-approach-to-climate-change, accessed 1-9-16.
Yet if the potential environmental benefits of a carbon tax have been oversold, its costs have been overstated too. The highly respected
environmental research organization Resources for the Future estimates that a $25-per-ton carbon tax roughly a middle ground in
economic calculations for the "social cost" of emissions would raise gas prices 21 cents per gallon and diesel fuel about 25 cents,
while electricity would go up 1.2 cents per kilowatt hour. A politically viable carbon tax would therefore almost certainly have to start at
a level lower than that. Although a tax at this lower level would still influence behavior, it probably would not be as visible at the gas
pump or in electrical bills. Furthermore, the estimated costs associated with potential carbon taxes are all well within the normal range of
price variability that naturally occurs due to new fossil-fuel discoveries, weather, and fluctuations in overall demand. Since the economy
handles changes like this all the time and energy represents only 6% of the overall economy, this is unlikely to have huge economic
consequences for the worse.
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Carbon Tax Desirable: EconomyJobs / Cost

1. Carbon taxes can promote job growth and check warming
Given the track record of climate legislation in Congressincluding the failed effort to pass the cap-and-trade bill in 2009enacting a
carbon tax poses more of a challenge than either expanding the regional carbon-pricing actions or using the Clean Air Act to regulate all
power plants. While both of these alternatives are steps in the right direction, a national carbon tax would be able to address more than
just our environmental concerns. In addition to mitigating the effects of climate change, a carbon tax could help solve our countrys
budget crisis and provide revenue for new job-creating investments in clean energy infrastructure. By raising new funds, driving new
investments, and reducing the likelihood of the most catastrophic consequences of climate change, a carbon tax is a tool that can take on
our countrys three most pressing challenges: the deficit, joblessness, and the climate crisis.
2. Pricing mechanisms can allow us to cost-effectively cut CO2 emissions

By internalizing the externalities associated with CO2 emissions, carbon pricing can promote costeffective abatement, deliver powerful
innovation incentives, and ameliorate rather than exacerbate government fiscal problems. By pricing CO2 emissions (or, equivalently, by
pricing the carbon content of the three fossil fuels coal, petroleum, and natural gas), governments defer to private firms and individuals
to find and exploit the lowest cost ways to reduce emissions and invest in the development of new technologies, processes, and ideas that
could further mitigate emissions. A range of policy instruments can facilitate carbon pricing, including carbon taxes, capandtrade,
emission reduction credits, clean energy standards, and fossil fuel subsidy reduction.
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Carbon Tax Desirable: EconomyOffsets

1. Carbon taxes enable a tax swap that fixes the tax code and encourages socially beneficial behavior
The real promise of a carbon tax is the potential boon that could be realized from a tax swap. Right now, the United States funds its
federal government largely by taxes on personal income, corporate profits, investments (capital gains and dividends), and labor (payroll
taxes). Most everyone would agree that it's better to have more of all of these things than less. While a 20% increase in tax rates will not
always result in a 20% decline in work effort, it's quite clear that lower taxes on these activities produce more of them than higher taxes
do. Cuts to personal income-tax rates championed by Presidents Kennedy, Reagan, and George W. Bush helped spur long economic
expansions. Unfortunately, today's large budget deficits and long-term shortfalls to pay for entitlement programs make significant future
tax cuts very difficult. Cutting taxes in the future, therefore, will require shifting the tax burden to something else. A tax on something
the nation clearly should want less of but will produce plenty of anyway carbon emissions is a perfect target. That's why
conservative economists like Kevin Hassett and Arthur Laffer are carbon-tax proponents. For example, at $20 to $25 per ton, a carbon
tax could raise enough money to eliminate the entire employee portion of the Medicare payroll tax or to reduce statutory corporate
income-tax rates to around the OECD average (America's statutory corporate tax rates are currently the highest among wealthy OECD
nations). This swap would work even while preserving most existing tax credits. As a political strategy, it is crucial that carbon-tax
proponents on the right insist on pure revenue neutrality. Even agreeing to spend a few dollars on some genuinely worthy purpose like
deficit reduction or a smart grid would open the floodgates to turning the carbon tax into a pork-filled mess similar to the unsuccessful
Waxman-Markey bill pushed by the Obama administration. A carbon tax isn't perfect tax policy, and policymakers will have to pay
careful attention to the specifics of its design. Most important, an effective carbon tax would have to replace almost all other
mechanisms used to control CO2. Policymakers should start by revoking the Environmental Protection Agency's authority to regulate
CO2 emissions. The Supreme Court may have ruled that the Clean Air Act essentially requires the EPA to regulate CO2, but that doesn't
mean this regulation is a good idea. The pollutants that the authors of the Clean Air Act had in mind things like sulfur dioxide and
nitrogen dioxide are intrinsically harmful to human health in a way that CO2 is not. What's more, those pollutants are emitted by a
reasonably small number of facilities, have almost all of their effects in the local area where they are emitted, and tend not to stay in the
atmosphere for long periods of time. The strategies needed to control them are thus quite different from those appropriate for controlling
CO2. Even Waxman-Markey recognized this and suspended the EPA's authority temporarily. A carbon-tax swap should do so
permanently. A number of other regulations around energy efficiency, such as Corporate Average Fuel Economy (CAFE) standards for
automobiles, might also be done away with as part of carbon-tax implementation. Many restrictions on extracting resources, likewise,
could largely be done away with since the carbon price would also factor in many of their costs. The best argument for a carbon tax is
simply that it's a good way to cut taxes on productive activity that society wants more of, while discouraging something that everyone
ought to want less of. Given the uncertainties implicit in climate change, an economy with low taxes on productive activity and therefore
higher growth will be more able to cope with the effects of a warming climate, even if the tax itself does little about it.
2. An offset carbon tax will increase the efficiency of the U.S. tax code
A carbon tax could, if designed correctly, improve the long-run U.S. fiscal situation while controlling U.S. greenhouse gas (GHG)
emissions. If the United States uses revenue from a carbon tax to fund a long-term reduction in other taxes, the tax swap could
potentially enhance the overall economic efficiency of the tax code. For example, revenue from a carbon tax could allow the United
States to reduce its statutory marginal corporate income tax rate, which is currently the highest in the developed world, to a more
internationally competitive level. It could also reduce payroll taxes or personal income tax rates. The carbon tax could also prevent cuts
in social safety net spending and reduce the federal budget deficit. A price on carbon could also supplant more-costly and less-effective
measures to reduce emissions, promote clean energy and energy efficiency, and drive innovation, saving both budget and regulatory
costs. An important dimension to the adoption of a carbon tax is the extent to which congress suspends or preempts existing legal
authorities to control GHG emissions at the federal and state levels.
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Carbon Tax Desirable: EconomyAnswers to Competitiveness / Energy Key

1. Import / export adjustments can address competitiveness concerns
One potential option for leveling the playing field is to implement carbon border adjustmentsa tax levied on imported goods
according to the emissions associated with their production. This would ensure that consumers pay for the carbon associated with the
goods they purchase, regardless of where the goods were produced, and would encourage them to seek lower-carbon substitutes, as
opposed to substitutes that have lower carbon prices. Energy-intensive exports to countries without climate policies could also receive a
refund of carbon payments at the point of shipment. Adjustments for imports and exports could be combined, creating destination-based
carbon pricing. No countries currently apply carbon border adjustments to manufactured goods. Trade law is unclear about whether such
measures would be legal, although many experts suggest they could be allowed if they are necessary to protect the integrity of the
emissions regulation.
2. We can shift energy demandit is elastic in the long-term

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. 53.
A carbon tax has the effect of shifting the demand curve to the left, as demonstrated in the diagram. Note that, since the demand for the
product is not perfectly inelastic (i.e., the demand curve is not perfectly vertical), the full incidence of the tax is not passed on to the
consumers. That is, the increase in price represented by P' - P is less than the amount of the tax. This does not alter the model, however,
since the burden of the tax that falls on the producer will be a factor taken into account from the producer's perspective when
determining the quantity that they are prepared to supply at a particular price (i.e., the incidence of the tax on the producer is treated as
any other factor of production that is incorporated into the supply curve). It should be noted that retail demand for energy is recognized
as being relatively inelastic, with the implication that the behavioral outcomes predicted by this basic model would not eventuate to the
extent suggested. Empirical evidence, however, indicates that this inelasticity is only short term, with long-term demand for energy
consistently found to be elastic across nations in the Organisation for Economic Co-operation and Development (OECD). Consequently,
demand for energy in the long run would be expected to be consistent with this model.
3. Energy constraint claims do not de-justify a taxwe need to cut our consumption, and they can be phased in
gradually
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. 7-8.
The counterargument to the preceding paragraph is that carbon consumption per se is not valuable, but energy is necessary to our
society, and much of that energy is likely to come primarily from fossilized carbon for the foreseeable future. There are two responses to
this counterargument. First, the carbon tax should be gradually phased in, so that there will be time to develop new sources of energy to
replace carbon. Second, we may simply have to live with less energy. Most sources of energy have potential problems: nuclear reactors
create plutonium and other radioactive materials with long half-lives, risking accidents or terrorism; bio-fuels seem to be driving up food
prices; hydroelectric power requires dams that harm fish and other wildlife and that may fail catastrophically; windmills may endanger
birds and bats, and some consider windmills to be visual pollution. However, to use less energy need not mean a lower standard of
living. Our society, our machines, our homes, and our lives have evolved to their present state only in the very recent past and in a world
of very inexpensive energy. With energy becoming more expensive, design and habits should change as we learn to substitute more
time, labor, material, and engineering for some of the energy we now expend. The historic link between energy consumed and quality of
life need not control the future.
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Carbon Tax Desirable: EconomyAnswers to Competitiveness / Energy Key [contd]

4. We can readily offset any negative economic effectsthe tax is very efficient
2008, p. 69.
Setting a clearing price for carbon that can be periodically evaluated for its effectiveness in achieving public policy and market
performance objectives is a simpler and more economically efficient approach than a cap-and-trade pro-gram. The cost of carbon can be
set through a tax mechanism, and its progress in reducing energy intensity can be evaluated every five years. This built-in evaluation
process permits adjustments to be made, which will ensure achievement of emission reduction goals. Technical inputs can be provided
by DOE, EPA, NOAA, and the National Academy of Science each cycle for review with final economic evaluations of the tax
conducted by Treasury and the Federal Reserve. In the United States, potential economic harm could be diminished by offsetting the
revenue resulting from a new carbon tax upon its enactment, with mirroring reductions in the payroll tax, the corporate tax rate, and the
alternative minimum tax. Additional revenue can be reserved in trust for government funding of clean energy technology and advanced
energy R&D. Economic feedback would be provided with balance to benefit the corporate, small business, and individual tax payers to
reduce the economic burden of the new carbon tax scheme by starting with a tax that is "revenue neutral." The key effectiveness of a
carbon tax program that is currently being overlooked is that such a tax may become revenue neutral. Revenue neutrality shifts the
economic burden to industries requiring behavioral and competitive modification consistent with global policy shifts while preserving
efficiency, energy intensity, and benefits of stability in the U.S. economy. No cap-and-trade proposal offers similar revenue neutrality
and the specter of economic stability. Rather, cap-and-trade arguably creates some market winners, many market or industry sector
losers, opportunities for gaming, and makes U.S. consumers the biggest losers of all.
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Carbon Tax Desirable: EffectiveInnovation

1. Higher prices will induce rapid innovationprevious experience proves
Realworld experience with energy pricing demonstrates the power of markets to drive changes in the investment and use of emission
intensive technologies. The runup in gasoline prices in 2008 resulted in a shift in the composition of new cars and trucks sold toward
more fuelefficient vehicles, while reducing vehicle miles traveled by the existing fleet (Ramey and Vine, 2010). Likewise, electric
utilities responded to the dramatic decline in natural gas prices (and decline in the relative gascoal price) in 2009 and 2010 by
dispatching more electricity from gas plants that resulted in lower carbon dioxide (CO2) emissions and the lowest share of U.S. power
generation by coal in some four decades (U.S. Energy Information Administration, 2009). Longerterm evaluations of the impacts of
energy prices on markets have found that higher prices have induced more innovation measured by frequency and importance of
patents and increased the commercial availability of more energyefficient products, especially among energyintensive goods such as
air conditioners and water heaters (Newell, Jaffe, and Stavins, 1999; Popp, 2002).
2. Carbon taxes will spur the development of clean energy technologies

A carbon tax would result in higher prices for carbon-intensive goods and services, potentially rewarding innovation and investment in
renewable energy, energy efficiency, carbon sequestration, and other technologies. Some energy experts recommend an increase in
spending for clean energy research and development, which could be financed from carbon tax revenues.
3. Carbon taxes encourage businesses to invest in new technologies

Another advantage is that the tax would encourage companies to continue to invest in new technologies. With a carbon tax, companies
always have a monetary incentive to consider alternative sources of energy compared to their current use of fossil fuels. Additionally, the
carbon tax also incentivizes consumers to request and purchase lower emission products so the tax liability passed on to them is reduced.
Having the tax be transparently imposed and passed on to the consumer will compel the reduction of fossil fuel usage to the forefront of
the political discussion. The transparency also limits the possibility that companies will address the program outside of the consumer's
purview.
4. Carbon taxes are superiorspur innovation

Jeremy Freeman, staff, Efficacy of Carbon Taxes and Recommendations for Cutting Carbon Emissions, HOUSTON BUSINESS &
TAX LAW JOURNAL v. 15, 2015, p. 289-90.
Innovation and economic development may be more enhanced when the correct price signals are sent. Examples of the effectiveness of
carbon taxation include the Swedish NO<x> tax. This tax actually pays the proceeds of the tax back to the polluters "in proportion to the
amount of electricity generated." If the Swedish polluters can efficiently produce electricity without producing excess NO<x> emissions,
then they will be paying less in taxes and receiving the benefits of their own innovation. A proper carbon tax may be better at
encouraging innovation than cap-and-trade because the price signal is steadier. Risk-averse investors will be more cautious about
investing when the prices are volatile and will generally demand a higher rate of return. Another reason that carbon taxation is superior
in spurring innovation over a cap-and-trade program is because innovation will actually reduce the value of the allowances held under a
cap-and-trade program. This is so because if polluters can produce goods more efficiently, i.e. with less pollution, then those polluters
will need fewer allowances to produce the goods driving the price of the allowance down. Thus, under a cap-and-trade system it is
possible for innovation to actually be discouraged.
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Carbon Tax Desirable: EffectiveInnovation [contd]

5. Carbon taxes will help boost the clean energy sector
While a carbon tax could slow the growth of industries that emit large amounts of CO2, the tax could also boost other industries,
particularly clean energy. A carbon tax could slightly reduce economy-wide employment due to lower demand for workers in carbonintensive industries and weakened incentives for labor force participation (because the tax would lead to higher prices, reducing
workers buying power).
6. Carbon taxes drive innovationcost certainty

A carbon tax also promotes pollution-abating innovation, both because it offers relatively higher and more predictable returns from new
technologies and because it incentivizes innovation across an array of potential activities. A carbon tax can be straightforward to
administer if designed properly, and because an exact dollar figure is assigned, it may indicate a transparent level of effort to other
countries, potentially fostering international agreements on environmental policies. And some economic research suggests that given the
different structures of the uncertainties in the incremental benefits and costs of an extra ton of GHG abatement, setting a carbon price
trajectory may be a better bet than setting annual country-level emissions targets. Of course, over the long run, it is important to ensure
that cumulative emissions of all countries do not exceed levels that would risk undue damages.
7. Market-based approaches will drive innovation

The major driving force behind market-based approaches is the belief that harnessing market forces is critical to developing the
operational changes and alternative technologies needed to reduce carbon dioxide emissions. Theoretically, reliance on market- based
forces would allow development of the most innovative and cost-effective form of carbon dioxide reductions, which may be less likely
to occur if the government mandates particular types of emission controls under the Clean Air Act or a comparable statutory scheme
focusing on carbon dioxide emission controls.
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Carbon Tax Desirable: EffectiveInnovation [contd]

8. A carbon tax maximizes innovationallows market forces to drive technological development
2010, p. 75-76.
An indirect pull approach - like a comprehensive tax - makes the most sense because it simultaneously encourages a variety of
innovations. Instead of pushing for particular technologies, where the government must act as an arbiter to favor one kind of technology,
the pull approach casts a long shadow and allows the market to reward a variety of innovations that find competitive advantages in
particular settings. For example, instead of the government putting all of its eggs in the solar basket, a price on carbon would allow solar
energy to take hold in a sunny place like Arizona and wind energy to develop on the less sunny, windy Eastern coasts. A pull approach
maximizes the capabilities of markets by providing for incremental innovations and allowing for adaptability in regional markets. Many
different technologies can be rewarded and implemented at once, which is exactly what the climate change situation calls for. Currently,
energy provided by clean tech barely registers on the overall energy pie. Transitioning from car-bon-based energy to clean technology is
a daunting project that will take decades. Some reports estimate that it will take thirty years for renewables to supply 25% of our global
energy. A carbon tax, then, properly frames the technological shift in long-term thinking. In retooling our energy supply, there will be no
silver bullet but thousands of solutions and millions of variations that will take decades for robust implementation. "Rather than a swift
series of eureka moments, progress [in the clean tech space takes] shape in setting goals, testing, tweaking, and then setting more goals."
The solutions, moreover, will come from multiple sectors, such as wind, solar, biofuel, and energy conservation. Each technology, if
developed and deployed simultaneously, will play a specific role in meeting future energy needs. This "wedge approach," which Al Gore
endorsed in his documentary, An Inconvenient Truth, proposes that replacing carbon use will require the utilization of numerous
renewable sources at once. A broad, multi-variant approach presents an ideal situation for government underwriting. Government is at its
best when it does not directly act, but puts its thumb on the scale to move society in a responsible direction. In applying diffuse pressure,
a carbon tax would create a larger framework for creating and distributing new technologies. Private enterprises across the board would
be invited to enter the clean tech space with the promise of making profits. Developed technologies, then, could reach the level of cost
competitiveness for widespread adoption and gradual diffusion to other parts of the world.
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Carbon Tax Desirable: EffectiveMarket Signal

1. Putting a price on carbon is the most efficient way to cut emissionsharnesses the power of the markets
Businesses, consumers, and governments emit carbon dioxide, methane, nitrous oxide, and other greenhouse gases by burning fossil
fuels, making cement, raising cattle, clearing land, and other activities. Those emissions build up in the atmosphere and trap heat, warm
the globe, raise sea levels, shift rainfall patterns, boost storm intensity, and increase the risk of sudden climate changes. Rising carbon
dioxide concentrations also alter the chemical balance of the oceans, harming coral reefs and other marine life. Greenhouse gas
emissions thus create a host of potential economic and environmental threats, including increased property damage from storms, human
health risks, reduced agricultural productivity, and ecosystem deterioration. The challenge for any effort to reduce climate change is that
emissions come from millions of sources and activities. For this reason, setting emission limits on individual sources, mandating specific
technologies, or establishing other direct regulations will be difficult and needlessly costly. Piecemeal regulations can reduce emissions,
but even the best-intentioned approaches under control some sources, over control others, and overlook still others. Moreover, direct
regulation does little to reward innovation beyond regulatory minimums. Thus, market-based approaches that place a price on emissions
are particularly attractive for combatting climate change. Establishing such a price would allow the market to do what it does best:
encourage consumers and businesses to reduce emissions at the lowest cost and provide an ongoing incentive for innovators to develop
new ways to reduce carbon emissions. Policymakers could establish a price on emissionsfor short, a price on carbonby levying a tax
or by setting a limit on emissions and allowing trading of emission rights. These two approaches have much in common. By putting a
price on carbon, both a tax and a cap-and-trade system harness market forces to reduce emissions as efficiently as possible. If the
government auctions emissions rights, rather than giving them away for free, a cap-and-trade system can also raise revenue just as a tax
would.
2. Carbon taxes are effectiveclear signals

A carbon tax sends a clear signal to polluters: pollution imposes a negative externality on others, and you should be forced to internalize
that cost by paying the tax.' There is no ambiguity about the message that is intended to be conveyed. Greenhouse gas emissions are
costly, and even if people are willing to pay the price, they should be aware of the societal cost they are imposing.
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Carbon Tax Desirable: EffectiveOther Countries Prove

-
Carbon taxes have been successfully implemented in other countries

In contrast to the limited experience in the U.S. with cap and trade, carbon taxes have been successfully implemented in a growing
number of countries. Carbon taxes have been implemented in Quebec and British Columbia as part of Canadian efforts to meet the
requirements of the Kyoto Protocol. In addition, Denmark, Finland, Italy, the Netherlands, Norway, and Sweden have introduced carbon
taxes in combination with energy taxes."' The existing carbon taxes are too new to draw meaningful conclusions about their long-term
benefits, but many economists believe that a carbon tax would be the most effective method of reducing carbon dioxide emissions.' Cap
and trade systems for carbon dioxide emissions have been implemented by the European Union 2' and on a regional basis in New
England;' in addition, seven Western states and four Canadian provinces have taken steps to develop a cap and trade system. As
discussed in Part III, the European Union system has not been particularly successful to date, but that has not diminished enthusiasm in
the United States and abroad for relying on cap and trade systems as the principal method of reducing carbon dioxide emissions.
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Carbon Tax Desirable: EffectiveAnswers to Implementation Problems

1. Carbon taxes would be relatively easy to implement
A carbon tax would be administratively simple and straightforward to implement in most industrialized countries, since the tax could
incorporate existing methods for fuelsupply monitoring and reporting to the regulatory authority. Given the molecular properties of
fossil fuels, monitoring the physical quantities of these fuels yields a precise estimate of the emissions that would occur during their
combustion.
2. Carbon taxes are easy to implementrelatively simple policy

Why is cap and trade so much more complicated than the carbon tax? A carbon tax is inherently simple: a tax is imposed at X dollars per
ton of carbon content on the main sources of carbon dioxide emissions in the economy, namely coal, oil, and natural gas. (Other
greenhouse gas sources, such as methane, are not included because energy accounts for nearly eighty-five percent of the 7147 million
metric tons of greenhouse gases in the U.S. economy. 32) The tax is imposed "upstream," i.e., at the point of extraction or importation,
which means than it can be imposed on only about 2000 taxpayers (500 coal miners and importers, 750 oil producers and importers, and
750 natural gas producers and importers) . Credits can be given to carbon sequestration projects and to other projects that reduce
greenhouse gas emissions (although this would need to be addressed in a way that does not dilute the price signal or create undue
complexity), and exports are exempted. Beyond that, the main question is what to do with the revenue, which will be discussed below.
3. A carbon tax would be easy to implementfossil fuel production is relatively centralized

At its core, a carbon tax is fairly simple because relatively few entities control virtually all carbon production. Although particular
entities may own thousands of coal mines or petroleum or natural gas wells, these entities tend to be relatively large and their extraction
activities have fixed locations at the source - unlike sellers or transporters or manufacturers, whose locations may easily shift - which
simplifies the process of identifying them and collecting the carbon tax. There are about 13,000 oil and natural gas extractors in the
United States, although the largest fifty control over seventy percent of both markets. Thirty "major coal producers" control eighty-six
percent of the U.S. coal market. The tax need not be collected from other entities along the chain of extraction, refining, manufacturing,
distribution, and finally consumption, because of two effects. First, the tax may cause a reduction in carbon output, making less carbon
available along the chain and thus lowering carbon emissions. Second, the tax will be passed along the chain to a substantial extent,
giving entities and individuals at all places along the chain an incentive to reduce carbon consumption.
4. Carbon tax is a straight-forward policycan be implemented immediately

Cap and trade is also relatively untried: we have never had an economy-wide cap and trade system, while we have extensive experience
with economy-wide excise taxes on a wide variety of products, including gasoline. This is why Congressman Larson's carbon tax bill can
simply envisage adding three new relatively short sections to the existing excise tax part of the Internal Revenue Code. Cap and trade, on
the other hand, is a major new and separate piece of legislation. A new administration determined to implement cap and trade would
probably have to take at least two years to get the program passed in Congress and set up for implementation, even with swift
Congressional action, because of the inherent delays in the rulemaking process. A carbon tax can be enacted and enforced practically
tomorrow. Given that we have already delayed action for decades, and that every year that passes makes the climate change problem
more difficult to solve, a carbon tax may be preferable to cap and trade-as well as traditional regulatory approaches-based on timing
concerns alone.
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Carbon Tax Desirable: EffectiveAnswers to Implementation Problems [contd]

5. Carbon taxes are superiorease of implementation
2010, p. 92-93.
A carbon tax poses few of the problems associated with a cap-and-trade system and offers many more benefits. Un-like a cap-and-trade
system, a carbon tax is fundamentally simple. Numerous characteristics beneficial to many tax systems are also at work in a carbon tax.
For one, a carbon tax can be easily implemented, administered, and overseen. The administrative infrastructure already exists to levy
taxes on fossil fuels, and the United States has extensive experience with economy-wide excise taxes on a wide variety of products,
including gasoline. The government could conceivably implement a carbon tax with minor additions to the Internal Revenue Code. In
fact, a carbon tax bill proposed by Representative John Larson, Connecticut, proposes adding three relatively short sections to the
existing excise portion of the Code. Unlike cap-and-trade implementation - which would require new and extensive legislation - a carbon
tax could apply broadly to all sectors in the economy with relative ease. Additionally, the administrative advantages could be heightened
if the tax occurred at the source, such as the wellhead, mine, or port of entry. Taxing fewer entities that expect strong supervision could
pass the costs downstream and would limit leakage. Lastly, the existing staff of the Internal Revenue Service, which has expertise in
enforcing excise taxes, could oversee tax collection.
6. Carbon taxes are very simple to administer

2008, p. 68.
The carbon content of every form of fossil fuel is precisely known, as is the amount of CO[2] released when that fuel is burned. This
precision presents few technical problems for documentation or measurement. The type of fuel and the amount purchased or used is
already tracked by most industrial and private consumers. Thus, instituting a carbon tax would require few, if any, additional reporting or
accounting burdens, while enjoying clarity and transparency. In addition, administering the carbon tax could utilize current tax collection
mechanisms and existing enforcement, compliance, reporting, and administrative resources. In contrast, the cap-and-trade approach
embraced by the financial industry envisions creating a complex new system for compliance reporting, audits, and verification with an
uncertain value proposition in return. Without developing rigorous new accounting and verification mechanisms, such a system is
unworkable and will be highly volatile and subject to gaming, thereby undermining confidence and certainty in planning the outcome. A
carbon tax is much more feasible than a cap-and-trade system, except for the threat of its dire political consequences.
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Carbon Tax Desirable: Energy Security

1. A carbon tax will spur a shift from fossil fuelswill help protect us against energy shocks
Various perspectives have been offered about how a carbon tax could affect the economy and in-depth analysis on this topic is currently
underway at RFF. Experts generally agree that how the tax is designed and how revenues are used will be the largest determinants of the
effects of the tax on the economy. A carbon tax would increase the cost of fossil fuels, encouraging companies to switch to currently
more expensive (albeit cleaner) fuels and leading households and companies to reduce energy use. These factors could make the
economy less dependent on fossil fuels and thus less likely to be hurt by energy price shocks.
2. Carbon taxes decrease fossil fuel dependence, undercutting funding for terrorist groups and dictators
NATIONAL POST, Editorial, The Conservative Case for a Carbon Tax, 7808,
www.nationalpost.com/opinion/columnists/story.html?id=5ec68168-fea5-4e5e-92e0-1219b4c44b26, accessed 1-5-16.
4) A carbon tax would fight terrorism and rogue power. This point cannot be repeated often enough -- especially for the benefit of those
red-meat conservatives cruising around with right-wing bumper stickers affixed to the back of their eight-cylinder Suburbans and
Escalades: When we pay US$140 a barrel for oil, we are enriching some of the most dangerous regimes on Earth -- including Saudi
Arabia, Venezuela and Iran. At worst, this means we are literally funding the nukes and terrorists that threaten to blow up Tel Aviv and
London. At best, it means sucking up to the likes of Vladimir Putin and Saudi Arabia's royal family. Simply put, it is impossible to
maintain any semblance of a principled foreign policy when your #1 enemies are also the pushers feeding your oil addiction. A carbon
tax wouldn't end this dependency entirely, but it could significantly move the West's effective demand curve for oil downward. And it
would mean that a greater share of the West's energy needs could be satisfied by homegrown sources. Billions in windfall profits would
be redirected from the coffers of Hugo Chavez and Mahmoud Ahmadinejad to those of George W. Bush and Stephen Harper.
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Carbon Tax Desirable: Fiscal Reform

1. Carbon taxes would cut emissions and open the door to broader fiscal reforms
Economists refer to the climatic damages of human-induced greenhouse gases as external costs because the emissions impose a cost
on society that is not reflected in the prices of goods and services that produced them. Policymakers can correct this market failure by
putting a price on greenhouse gas (GHG) emissions, for example by taxing GHG emissions, and thereby cost-effectively reducing
emissions through market forces. A GHG emissions tax would reduce emissions by changing the relative prices of fuels and other goods
and services according to their emissions intensity. Such a tax would also produce revenue, raising the option of including the measure
in a broader package of fiscal reforms. The largest source of greenhouse gas emissions is carbon dioxide from the combustion of fossil
fuels, so many economists particularly advocate an excise tax on the carbon content of those fuels, or a carbon tax. (The terms carbon
tax and GHG emissions tax are used interchangeably throughout this report, unless specified otherwise.)
2. Carbon taxes can displace less economically efficient taxes

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 514, p. 3-4.
First, if we need revenue, taxing something we do not want (e.g., GHGs) rather than something we do want (e.g., productive labor and
investment) intuitively makes sense. In other words, a well-designed carbon tax can be more economically efficient than other taxes
because it helps correct a market failure as well as raise revenue. A few studies suggest that a carbon tax that substitutes for a more
distortionary tax (such as income from investments or working) could even improve welfare irrespective of its environmental benefits by
making the tax system more efficient. Of course, there are drawbacks to a carbon tax, which is why embedding it as part of an overall
package of fiscal reform is desirable. These drawbacks include the potential regressivity of a carbon tax, meaning it could impose a
higher burden on low-income households as a share of their incomes than it would on high-income households. Further, the burden of
the tax is likely to be higher in areas that are coal dependent than in areas that use other fuels for electricity. We discuss these and other
issues, as well as the potential for a tax swap later in this paper.
3. Carbon taxes open the door to additional fiscal reforms

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 514, p. vi-vii.
A carbon tax could create opportunities within a tax reform package that may not otherwise exist. Taxing something we do not want
(e.g, greenhouse gas emissions) rather than something we want more of (e.g., productive labor and investment) could help lower the
economy-wide cost of the program and may even have economic benefits in addition to its environmental benefits. The overall
economy-wide effects of a carbon tax would depend on three factors: the price increases that result from the tax (i.e., who bears those
prices and by how much); the final disposition of the carbon tax revenue (i.e., how the revenue is used); and how these changes would
ripple through the broader economy. Including a carbon tax as part of a broader fiscal reform could ameliorate the potential regressivity
of a carbon tax, which could result because lower-income individuals may spend a larger share of their income on energy. Directing
about 15 percent of annual revenues toward households whose incomes fall below 150 percent of the poverty line would ensure that the
poorest fifth of households would not be made worse off under a carbon tax. Regional variations in the burden of a carbon tax as a share
of income would be modest due to regional patterns of fuel consumption and use, but some particularly coal-intensive states could face
relatively larger burdens. Revenues from a carbon tax could fund reductions in other taxes. As seen in Table ES, policymakers could: o
Reduce the U.S. statutory marginal corporate income tax, currently the highest in the developed world, while simplifying the tax
provisions that allow most corporations to pay far lower effective rates. o Reduce payroll or personal income taxes, prevent cuts in social
safety net spending, and reduce the federal budget deficit.
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Carbon Tax Desirable: Fossil Fuel Shift

1. A shift away from fossil fuels is inevitablea carbon tax is the best way to smooth the transition
2010, p. 70-71.
One way or another, the era of cheap carbon energy is ending. The question before us is how to best navigate the transition from carbon
energy to clean technology. Since the industrial revolution, carbon has been a key facilitator in the most explosive growth in human
history. Fossil fuels, however, are finite, and numerous analyses suggest that we have already hit peak consumption. In addition to their
inevitable depletion, several factors compel a transition away from fossil fuels and toward clean-energy sources such as solar, wind, and
biofuels (collectively referred to as "clean tech"). This Article argues that a carbon tax is the best policy to facilitate the unavoidable
transition to new energy sources. The move away from human reliance on fossil fuels is both pushed by the need to avoid negative
environmental and geopolitical consequences and pulled by the opportunity for economic growth. Under the current system for
redistributing the world's fossil fuel reserves, both importing and exporting nations face great political and economic costs. For
supplying nations - especially those with weak democracies or dictatorships - the presence of oil frequently corrupts the political culture
and leads to violent struggles for control. For oil consuming nations, the payment of trillions of dollars annually to oil producing
countries is causing one of the biggest transfers of wealth in human history. The United States steadily pays billions annually to
producing countries such as Venezuela, Iran, and Russia. In sheer economic terms, the rising bill for imported petroleum lowers the
United States savings rate, adds to inflation, worsens the trade deficit, and undermines the dollar. 5 Profound redistributions of wealth
also impact relationships between nations. Nations ideologically opposed to the United States gain financial independence, confidence,
and capabilities. Moreover, fossil fuel resource depletion could "potentially destabilize the geo-political environment, leading to
skirmishes, battles, and even war due to resource constraints." Environmental concerns present another host of reasons that compel the
transition away from fossil fuel consumption. Governments and a growing public majority are joining the near uniform scientific
consensus that global warming is a reality and that a century of industrial development has acutely impacted the ecosystem. Scientists
believe that most of the warming in the last fifty years is human-induced and has led to melting glaciers, rising sea levels, the
unbalancing of ecosystems, and intensified droughts and wildfires. Scientists also believe that rising temperatures will increase the
frequency of catastrophic, Katrina-like events, such as the submergence of low-lying coastal areas and violent storms.
2. A shift from fossil fuels is inevitablea carbon tax only smooths out the transition
INTERNATIONAL ENVIRONMENTAL LAW AND POLICY v. 20, Fall 2008, p. 8.
A carbon tax will merely speed up inevitable societal changes and cause them to occur in a more orderly manner. The extent of the
Earth's fossil carbon resources is uncertain and although there are likely to be further major discoveries, these resources are ultimately
finite. World economic growth is consuming them at accelerating rates. The recent sudden rise in petroleum prices warns us of what
might happen in the future unless we smooth the transition to a less carbon-intensive world.
3. Carbon taxes are the best way to encourage a transition away from fossil fuels
2010, p. 97.
The end of the era of cheap fossil fuels presents us with an unprecedented opportunity. The transition to alternative energy sources could
be clean or messy. Fortunately, the agents of change are within our control. Nothing new is needed to realize the vision of a clean tech
revolution. The necessary levers for change - capital, technology, and policy - exist and the government can deploy them in a way that
avoids the downside and capitalizes on the upside. Favorable government policy is essential in smoothing and steering the transition
from carbon fuels to clean forms of energy. Ultimately, a carbon tax presents the most sensible policy. It provides a market-based
solution that harnesses people's irrepressible entrepreneurial spirit and rewards innovation in a pre-determined, environmentally
responsible space. Re-casting our energy usage will be a monumental challenge, but the benefits are obvious, and a carbon tax is a small
yet assured step forward.
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Carbon Tax Desirable: Fossil Fuel Shift [contd]

4. People can and will adapt to the tax, decreasing their fossil fuel use
Third, individuals can change their conduct to reduce their carbon tax liability. Although some users of certain carbon products, such as
gasoline, may have little ability to reduce their carbon-based purchases, other users may be flexible even in the short run, and even more
users should be flexible in the long run. In the short run, possibilities for decreasing carbon use include: reducing recreational driving;
planning accordingly to accomplish several social, shopping, and business excursions in one trip; walking, bicycling, carpooling, or
using mass transit more often; and scheduling work for four days rather than five, reducing commuting by twenty percent. Many persons
may be able to choose to use their fuel-efficient sedan more than their fuel-guzzling SUV, minivan, or pickup truck. Moreover, in the
long run, individuals can buy or rent more fuel-efficient cars, homes, and appliances; live closer to work or to mass transit; invest in
alternatives such as hybrid, plug-in, or perhaps hydrogen or fuel cell vehicles; and use energy collected from solar, wind, water,
geothermal, biomass, or other sustainable sources.
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Carbon Tax Desirable: Green Energy Development

1. A carbon tax will jumpstart green energy development and use
Eduardo Porter, journalist, A Carbon Tax Could Bolster Green Energy, NEW YORK TIMES, 111814,
www.nytimes.com/2014/11/19/business/economy/a-carbon-tax-could-bolster-wobbly-progress-in-renewable-energy.html?_r=1,
accessed 1-9-16.
Wobbles on the road to a low-carbon future are hardly unique to the United States. In its latest Energy Technology Perspectives report, the
International Energy Agency noted that the deployment of photovoltaic solar- and wind-powered electricity was meeting goals established to
help prevent temperatures from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) above the average in the preindustrial era, the limit
agreed to by the worlds leaders to avoid truly disruptive climatic upheaval. In the same report, however, the organization noted that other
technologies bioenergy, geothermal and offshore wind were lagging. And it pointed out that worldwide investment in renewable power
was slowing, falling to $211 billion in 2013, 22 percent less than in 2011. These wobbles underscore both the good news and the bad news about
the worlds halting progress toward reducing the greenhouse gas emissions that are capturing heat in the atmosphere and changing the worlds
climate. The good news is that humanity is developing promising technologies that could put civilization on a low carbon path that might
prevent climate disruption. These technologies allowed the Environmental Protection Agency to pass new rules aimed at achieving a 30 percent
reduction in carbon dioxide emissions from American power plants by 2030, compared with 2005. They allowed President Obama last week to
promise that the United States would curb total greenhouse gas emissions by 26 to 28 percent from 2005 levels by 2025 a big step that, White
House officials say, can be achieved without further action from Congress. And they allowed China to commit to start cutting emissions after
2030. The bad news is that civilization is mostly not yet on such a low carbon path. While promising technologies to get there have been
developed, it is unclear whether nations will muster the political will and mobilize the needed investments to deploy them. New energy
technologies have become decidedly more competitive. The United States Energy Information Administration projects that the levelized cost of
onshore wind energy coming on stream in 2019 a measure that includes everything from capital costs to operational outlays could be as
little as $71 per megawatt-hour measured in 2012 dollars, even without subsidies. This is $16 less than the lower cost projection four years ago
for wind energy coming online in 2015. Similarly, projections for the levelized cost of energy from photovoltaic solar cells have tumbled by
more than 40 percent, much faster than the cost projections of energy from coal or natural gas. Challenges remain to relying on intermittent
energy sources like the sun or the wind for power. Still, experts believe that hitching solar and wind plants to gas-fired generators, and using
new load management technologies to align demand for power with the variable supply, offer a promising path for aggressively reducing the
amount of carbon the power industry pumps into the atmosphere, which accounts for nearly 40 percent of the nations total carbon dioxide
emissions. And new Energy Information Administration projections to 2040 show prices for renewables falling even lower. By then, electricity
from photovoltaic solar plants could be generated for as little as $86.50 per megawatt-hour, without subsidies. In some areas wind-based plants
could produce it for as little as $63.40. Nuclear energy is also becoming more competitive. Without any subsidies, new-generation nuclear
power coming on stream in 2040 could cost as little as $80 per megawatt-hour, all costs considered. This is only marginally more expensive
than electricity produced with coal or natural gas, even without the added cost of capturing the carbon dioxide. And there are much more
optimistic cost assessments out there than the Energy Information Administrations. But for all the optimism generated by cheaper renewable
fuels, they do not, on their own, put the world on the low-carbon path necessary to keep climate change in check. Progress is faltering on several
fronts. The precipitous fall in the prices of photovoltaic cells from 2008 to 2012 pretty much stopped in 2013, after rapid consolidation of the
industry. The International Energy Agency now projects that installed global nuclear capacity in 2025 will fall 5 percent, to 24 percent below
what will be needed to stay on the safe side of climate change. And carbon capture technologies, which will be essential if the world is to keep
consuming any form of fossil fuel, remain hampered by high costs, meager investment and scant political commitment. The unrelenting rise in
coal use without deployment of carbon capture and storage is fundamentally incompatible with climate change objectives, noted the
International Energy Agency in its Technology Perspectives report. Despite the falling costs of renewable energy in the United States, the
Energy Information Administrations baseline assumptions project that in 2040 only 16.5 percent of electricity generation will come from
renewable energy sources, up from some 13 percent today. More than two-thirds will come from coal and gas. Without some carbon capture and
storage technology, drastic climate change is almost certainly unavoidable. What is necessary to get us on a safer path? White House officials
trust that the administration has the tools, including fuel economy and appliance efficiency standards, the Environmental Protection Agencys
new limits on power plant emissions and regulations to limit other greenhouse gases. Yet the Energy Information Administrations projections
suggest how hard the task will be. Though they were developed before the Environmental Protection Agency issued its new rules, they included
hypothetical outlines that could mimic some of its effects. In one, coal power plants were decommissioned more quickly; in another, subsidies to
renewable energy were kept until 2040. In another, the price of renewables fell faster than expected. None of them did much to move the carbon
dial. There is one tool available to trim carbon emissions on a relevant scale: a carbon tax. That solution, however, remains off the table. If a
carbon tax were to be imposed next year, starting at $25 and rising by 5 percent a year, the Energy Information Administration estimates, carbon
dioxide emissions from American power plants would fall to only 419 million tons by 2040, about one-fifth of where they are today. Total
carbon dioxide emissions from energy in the United States would fall to 3.6 billion tons 1.8 billion tons less than today. By providing a
monetary incentive, economists say, such a tax would offer by far the most effective way to encourage business and individuals to reduce their
use of fossil fuels and invest in alternatives.
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Carbon Tax Desirable: Green Energy Development [contd]

2. Carbon taxes will help boost the clean energy sector
While a carbon tax could slow the growth of industries that emit large amounts of CO2, the tax could also boost other industries,
particularly clean energy. A carbon tax could slightly reduce economy-wide employment due to lower demand for workers in carbonintensive industries and weakened incentives for labor force participation (because the tax would lead to higher prices, reducing
workers buying power).
3. The price incentives will drive the development of energy alternatives

A crediting system for downstream sequestration could complement the emission tax system. A firm that captures and stores CO2
through geological sequestration, thereby preventing the gas from entering the atmosphere, could generate tradable CO2 tax credits, and
sell these to firms that would otherwise have to pay the emission tax. As fuel suppliers face the emission tax, they will increase the cost
of the fuels they sell. This will effectively pass the tax down through the energy system, creating incentives for fuelswitching and
investments in more energyefficient technologies that reduce CO2 emissions.
4. Carbon taxes will spur growth and green energy development

2010, p. 74.
Piecemeal incentives like tax credits for hybrids or the PTC can create cost competitiveness and bolster investments in particular
markets. The scale of transformation at hand, however, requires a greater, more uniform level of government incentive and regulation.
The United States alone spends over a trillion dollars annually on energy. Currently, clean tech energy occupies a tiny percentage of that
space. Even optimistic estimates of retooling the energy infrastructure talk in twenty to fifty year blocks. Placing a cost on carbon would
apply a relatively hands-off market pressure and would raise the tide to lift numerous clean tech enterprises. A carbon tax could ignite
innovation, spur economic growth, and steer the economy in a direction that we thoughtfully choose. Favoring clean tech, however, does
not require the government to meddle where it has not before. Critics often point to clean tech's need for regulatory support, but energy
has always been heavily dependent on regulation. The federal government extensively regulates other large industries such as
transportation, water, and construction. Governments inevitably regulate major industries, and such regulation unavoidably favors
certain markets and guides economic development. A carbon tax would replace one philosophy of regulation with another. "There is no
such thing as a subsidy-free energy, and there never has been in the modern world." The histories of oil, coal, natural gas, hydroelectric,
and nuclear power all include direct and indirect financial support from governments that sought to develop them. Nuclear energy in the
United States, for example, received $ 50 billion in direct government funding for research and development between the years 1973 and
2003. Likewise, the oil industry, despite making record profits, still benefited from $ 73 billion in tax breaks in the last six years.
Governments create policies and incentives to encourage the markets they choose. The choice then is not if governments should be
involved in energy policy, but how. Part of encouraging clean tech would mean eliminating long-running incentives for the mature and
established energy industries. This Article posits that a carbon tax provides a necessary shift in government energy policy, which would
enable private market mechanisms to create vibrant markets in a sensible, predetermined space.
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5. We can use a carbon tax to achieve a green energy revolution
2010, p. 71-72.
The possible environmental and geopolitical consequences alone raise reason enough to discontinue the current "business as usual" path.
But this Article does not intend to join the increasingly cacophonous chorus of doomsayers. Rather, it argues that the inevitable move
away from fossil fuels presents an opportunity for an unprecedented economic and technological shift. If governments, individuals, and
organizations choose to develop renewable energies, we can address pressing global issues, build new high-growth economies, improve
collective security, and ensure brighter prospects for future generations. In a unique moment in modern history, renewable energy offers
a simultaneous promise of economic growth and environmental sustainability. Indeed, a clean tech revolution will depend on financial
growth, built around current and future business opportunities, driving us toward a more sustainable world. Technology markets,
supported by capital and the right governmental policies, can provide the engine that generates new high-paying jobs, competitive
businesses, vast infrastructure investment, and long-term sustainability. Ultimately, this Article embraces a market-based solution. A
carbon tax - to be imposed on coal, natural gas, and oil produced in or imported to the United States - would create a price signal for
private markets to reduce carbon di-oxide emissions and invest in the development of fossil fuel alternatives. Such a signal would utilize
the undeniable force and meritocratic nature of capitalist markets to transition to a new, wealth-generating economy. In relying on our
capitalistic nature, we can meet the world's rising energy needs while transitioning away from the exploitive dependence on carbon
energy.
6. Carbon taxes will spur clean energy innovation

FISCAL REFORM: DESIGN AND DISTRIBUTIONAL ISSUES, Center for Climate and Energy Solutions, 514, p. vii.
A carbon tax could reduce the need for other climate and energy policies. An appropriate tax would lower GHG emissions and spur
clean energy innovation, making less-efficient energy and climate policies unnecessary. One scholar estimates that about $6 billion in
annual direct and tax expenditures for clean energy deployment could be replaced with a modest carbon tax with the same impact on
deployment. A broad national carbon tax could reduce greenhouse gas emissions more effectively and less expensively than sector-bysector and state-by-state regulation under the Clean Air Act. Federal funding for basic research and development would remain
important under a carbon tax because those activities would be under-funded by market forces alone.
7. Carbon taxes will promote clean energy development

A carbon tax would place a fee on polluters that emit GHGs like carbon dioxide, methane, and nitrous oxide. It should be applied at
major sources of GHG emissions: coal-fired power plants, petroleum refineries and importers, natural gas processors, and cement, steel,
and GHG-intensive chemical plants. This tax would prod us away from dirty fossil fuels and toward clean energy alternatives to avert
global warming while raising considerable revenue. Global warming is happening, whether or not lawmakers on Capitol Hill want to
acknowledge it. Unfortunately for the rest of us, the consequences of ignoring it are dire.
8. Ratcheting up the tax will spur the smooth development of energy innovations
On the other hand, to adjust the carbon tax to produce a steady rise in carbon costs would promote efficient development of new
technologies. Too often in the past, sudden price increases have found the substitute technology undeveloped or not yet deployed.
Additionally, sudden price decreases have frequently derailed development and deployment of new technologies. Under this approach,
instead of steadily increasing carbon taxes, Congress might provide for a steady rise in the price of carbon, including the tax. Under this
approach, the tax would rise less as carbon prices rose faster, and the carbon tax would rise more when carbon prices were not rising.
This smoothing might ease the weaning from carbon dependence.
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9. A carbon tax will drive energy innovationwill push capital into clean-tech development
2010, p. 82-85.
To understand how a carbon tax would drive a clean tech revolution, we must first understand the process of business development and
the problems facing capital investment. The private sector, while capable of profit and success without any changes to public policy,
must overcome numerous obstacles in bringing a business to market. A carbon tax has the potential to harness innovation and ease
distribution bottlenecks, making clean tech a more attractive industry. The overall process of business development often begins with
new ideas and new technologies. Or, in the case of many clean technologies, the ideas have existed for years but were unappealing to
investors until the price of oil spiked and climate change became a concern. Now, places like the Silicon Valley are abuzz with private
investment, as numerous firms vie to create the next clean tech Google. Many investment firms, like Kleiner Perkins Caufield & Byers
(KPCB) - the company behind Google - have made a trade of finding the next big thing, often developing their projects in secret. Most
of the Kleiner's green-tech investments are not publicly discussed... . The firm has acknowledged 15 of its 40 in-vestments. The rest are
in what [Venture Capitalists or] V.C.'s call "stealth" mode, hidden from the press (and copycat V.C.'s) until they are on sounder footing.
Last summer, the growing number of stealth companies involved with clean energy formed a kind of dark matter in the Silicon Valley
universe, businesses that could not be seen yet nevertheless exerted a discernible gravitational pull. Executives would suddenly leave
jobs at established companies to join ventures with no official name. Manufacturing facilities would set up shop in cheap, anonymous
buildings in towns like Santa Clara, Calif., then begin round-the-clock operations. Already, without major policy incentives, many
investors are betting their portfolios on the promise of clean technology. The amount of money changing hands is staggering. Al Gore, a
partner of KPCB, who increasingly devotes his energy to the private arena, recently stated that "more money is allocated in the private
markets in one hour than in all of the budgets of all of the governments of the world in a year's time." Even great ideas with successful
proofs of concept have a high probability of failure. Entrepreneurs refer to the phase between a project's origins and its commercial
deployment as "the valley of death." Ideas must overcome numerous obstacles to make it to the market. Among the main risks are: (1)
technological scalability - can the idea be reproduced and can others easily learn the process; (2) personnel - are the people behind the
idea capable in their sales pitches and executions of the idea; (3) market receptiveness - even if the product is offered, will people buy it;
and (4) financing - have all the stages thus far proven promising enough to earn continued investment? Financing typically comes is
several rounds, and businesses that have problems with their technology, management, or marketing have difficulty attracting more
financing. Another inescapable challenge associated with the above risks is the innovator's paradox. Many clean-tech companies are
developing products that require new industrial processes. At the beginning, developers face a challenge in reaching mass production
"because not enough buyers are willing to pay for the costly products. On the other hand, the products cost so much because they are not
being mass-produced." The historical pattern of innovation indicates that novel products can overcome this paradox and succeed in the
marketplace by exploiting a niche market. As sales expand and performance improves, the costs drop to a level that allows widespread
affordability. Cell phones are an example of this phenomenon. Initially balky and expensive, only a niche market of business people in
the developed world appreciated cell phones. As the market gradually expanded, costs decreased, reliability improved, and eventually,
governments and entrepreneurs in developing countries found it cheaper to build cellular networks than landlines. Many clean tech
entrepreneurs have similar ambitions. They envision that fuel cell and solar technologies will gradually disseminate from cutting edge
centers like Silicon Valley to places around the world that have never had access to a grid. The dissemination of clean technology from
cutting edge centers into the mainstream poses a unique challenge because of the energy market's vast scale. Unlike personal computers
or software, which have traditionally moved into the mainstream relatively quickly, the dissemination of energy technology may take
much longer. Google, for example, took $ 25 million and five years to reach its initial public offering. A medical venture can take $ 100
million in in-vestment and ten years to mature. A clean tech company that requires a new industrial process like solar panels could take $
500 million and fifteen years to reach market. Energy, in other words, operates on a different scale than other industries and requires its
own treatment. Projects like commercializing fuel cells or equipping gas stations with ethanol pose an investment risk too great to invite
numerous business models. A price on carbon is needed to tip the scales of risk to attract investors to the higher stakes.
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Carbon Tax Desirable: Infrastructure Investment

-
We can use the revenue to rebuild our infrastructurea carbon tax is desirable
What size levy is appropriate? Here there is more danger of doing too little than too much. Once the principle of taxation is accepted, its
level can be adjusted. A tax of $25 a ton would raise more than $100 billion each year and seems a reasonable starting point. How
should the proceeds be used? Here, too, it seems more important to reach consensus on the principle of taxation. My preference would
be for the funds to be split between investments in infrastructure and pro-work tax credits. An additional $50 billion a year in
infrastructure spending would be a significant contribution to closing Americas investment gap in that area. The same sum devoted to
pro-work tax credits could finance a huge increase in the earned-income tax credit, a meaningful reduction in the payroll tax or some
combination of the two. Progressives who are most concerned about climate change should rally to a carbon tax. Conservatives who
believe in the power of markets should favor carbon taxes on market principles. And Americans who want to see their country lead on
the energy and climate issues that are crucial to the world this century should want to be in the vanguard on carbon taxes. Now is the
time.
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Carbon Tax Desirable: MechanismGeneral

1. A well designed carbon tax will be effectivepredictable, modest start, gradual ramp up
The carbon tax with the least economic cost would be predictable, start modestly, ramp up gradually, and minimize administrative costs.
Over the long run, the price on carbon should be consistent with the social cost of carbon, as best as it can be estimated, and it can be
updated as new information develops. A gradual and predictable policy would promote efficient turnover of long-lived industrial plants
and equipment, allow households to adjust with minimal disruption, and incentivize innovation and deployment of new technologies.
Some economists recommend that the real rate of increase in a tax should match the returns on relatively low-risk capital assets, which is
about four or five percent above inflation. A tax applied as broadly as feasible to fossil fuels, non-energy sources of carbon dioxide
emissions, and other greenhouse gases (based on their global warming potential relative to carbon dioxide) would deliver the same
incremental incentive to reduce emissions in all sectors, and therefore be the most economically efficient. A carbon tax could be
applied either upstream, where the fossil fuels enter the economy, or downstream, where the carbon is emitted to the atmosphere. An
upstream tax on the carbon content of fossil fuels could price 80 percent of U.S. greenhouse gas emissions by taxing fewer than 3,000
entities, thus minimizing administrative costs while offering broad coverage. Carbon that is not emitted, for example because it is
sequestered underground or embodied in long-lived products, should be eligible for a tax rebate or credit.
2. The EPA has the power to implement a de facto carbon tax

Christian Parenti, Professor, Sustainable Development, School for International Training, Graduate Institute, A Radical Approach to the
Climate Crisis, DISSENT, Summer 2013, www.dissentmagazine.org/article/a-radical-approach-to-the-climate-crisis, accessed 1-1-16.
Rather boring in tone and dense with legalistic detail, the ongoing fight over EPA rulemaking is probably the most important
environmental battle in a generation. Since 2007, thanks to the pressure and lawsuits of green activists, the EPA has had enormousbut
under-utilizedpower. That was the year when the Supreme Court ruled, in Massachusetts v. Environmental Protection Agency, that the
agency should determine whether greenhouse gases threaten human health. In December 2010, the EPA published a science-based
endangerment finding, which found that CO2 and five other greenhouse gases are, in fact, dangerous to human life because they cause
global warming. Once the EPA issues an endangerment finding, it is legally bound to promulgate regulations to address the problem.
The first of these postMassachusetts v. EPA tailoring rules were for mobile sources. Between 2011 and 2012, regulations for cars
and for trucks went into effect. Then the EPA set strict limits for new power plants in 2012. But other major sources of greenhouse gas
pollutionlike existing electric power plants (which pump out roughly 40 percent of the nations total GHG emissions), oil refineries,
cement plants, steel mills, and shippinghave yet to be properly regulated pursuant to Massachusetts v. EPA. If the EPA were to use the
Clean Air Actand do so with extreme prejudiceit could impose a de facto carbon tax. Industries would still be free to burn dirty
fossil fuels, but they would have to use very expensive, and in some cases nonexistent, new technology to meet emission standards. Or
they would have to pay very steep and mounting fines for their emissions. Such penalties could reach thousands of dollars per day, per
violation. Thus, a de facto carbon tax. Then cheap fossil fuel energy would become expensive, driving investment toward carbon-neutral
forms of clean energy like wind and solar. For extra measure we could end fossil fuel subsidies. Before long, it would be more profitable
to invest in clean energy sources than dangerous and filthy ones.
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Carbon Tax Desirable: MechanismBorder Tariff

1. A carbon tax scheme should include border adjustments
Gilbert E. Metcalf, Professor, Economics, Tufts University and David Weisbach, Professor, Law, University of Chicago, The Design of
a Carbon Tax, HARVARD ENVIRONMENTAL LAW REVIEW v. 33, 2009, p. 502.
The third design issue relates to trade in carbon-intensive goods. We argue that border tax adjustments for a carbon tax are necessary and
appropriate. There is, however, no simple and clearly legal method of implementing a system of border tax adjustments to prevent socalled carbon "leakage," the shifting of production to countries without a carbon pricing mechanism. The key problem is that to set the
border tax adjustment, information is needed about the particular production technology and sources of energy used to produce an item.
In contrast, border tax adjustments under a value-added tax ("VAT") require only readily available data: for imports, knowledge of the
item's price, and for ex-ports, verification of export. The necessary information may be difficult to obtain for a carbon tax.
2. We can address production / consumption shifts through border taxes

Second, a US carbon tax may shift some purchases from goods produced in the United States to goods produced abroad in locations
subject to lower or no taxes. In the extreme, if the tax simply shifts purchases of carbon-intensive goods from the United States to other
countries, it will have no effect on greenhouse gas emissions, but it will make some US industries unable to compete in world markets.
To prevent shifts in production, a unilateral US carbon tax would have to apply to imports and exempt exports. Taxing imports and
exempting exports prevents foreign producers from gaining an advantage in serving US and foreign markets. Exempting exports also
avoids any incentive for US firms to move production abroad to serve foreign markets. Such border adjustments would mean that US
consumers would pay the tax regardless of where production occurs, and US producers would collect and pass forward the US tax only
if they sell to US consumers. This would make the tax neutral with respect to decisions on the location of production. In that way, it
would parallel existing US taxes on highway motor fuels, alcoholic beverages, and tobacco and value-added taxes in most countries, all
of which apply to imports and exempt exports.
3. There are strong arguments for border tax adjustments

Because carbon emissions are a global externality -- emissions anywhere affect everyone -- and because of the large volume of trade in
fossil fuels and in goods produced with fossil fuels, carbon taxes must always be designed with international considerations in mind. In
an ideal world, all countries would impose a harmonized carbon tax so that emissions anywhere in the world faced the same price.
Realistically, some major emitting countries either will refuse to impose any price on carbon at all or will do so in a narrow or
perfunctory way. Even countries that impose carbon pricing regimes may not harmonize their regimes, creating problems when goods
subject to different tax rates are traded. There are good arguments that border tax adjustments -- taxes on imports to compensate for
taxes on domestic production and rebates of such domestic taxes on exports -- are not inconsistent with, and in fact are required by, the
principles of free trade. Free trade relies on the principle of comparative advantage. In a free market, everyone is better off if those who
can produce a good at lowest cost do so. A country without a carbon price does not have a true comparative advantage in producing
carbon-intensive goods relative to a country with a carbon price; it produces at what looks like a lower cost only because the nominal
price of the good does not include the full costs of production.
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Carbon Tax Desirable: MechanismOffset / Revenue Neutral

1. We should enact a revenue-neutral carbon tax
Jonathan H. Adler, Professor, Law, Case Western Reserve University, "A Conservative's Approach to Combating Climate Change,"
THE ATLANTIC, 5--30--12, http://www.theatlantic.com/business/archive/2012/05/a-conservatives-approach-to-combating-climatechange/257827/, accessed 1-1-16.
Third, I believe the United States should adopt a revenue-neutral carbon tax, much like that suggested by NASA's James Hansen.
Specifically, the federal government should impose a price on carbon that is fully rebated to taxpayers on a per capita basis. This would,
in effect, shift the incidence of federal taxes away from income and labor and onto energy consumption and offset some of the potential
regressivity of a carbon tax. For conservatives who have long supported shifting from an income tax to a sales or consumption tax, and
oppose increasing the federal tax burden, this should be a no brainer. If fully rebated, there is no need to worry about whether the
government will put the resulting revenues to good use, but the tax would provide a significant incentive to reduce carbon energy use.
Further, a carbon tax would be more transparent and less vulnerable to rent-seeking and special interest mischief than equivalent capand-trade schemes and would also be easier to account for within the global trading system. All this means a revenue-neutral carbon tax
could be easier to enact than cap-and-trade. And as for a broader theoretical justification, if the global atmosphere is a global commons
owned by us all, why should not those who use this commons to dispose of their carbon emissions pay a user fee to compensate those
who are affected.
2. A carbon tax should ideally be used to offset other taxes

To a large extent, the design of a carbon tax is separable from the issue of how to spend the money. Moreover, as noted, the potentially
regressive distributive effects of a carbon tax should be offset through adjustments to the in-come tax rather than through adjustments in
the design of the carbon tax, so that distributive issues are also separable. Nevertheless, because the revenue and distributive effects are
significant, it is worth spending a few words on these is-sues. We consider two alternatives. Our first and preferred option is to maintain
revenue and distributional neutrality. Whatever the decision is on proper size of government and proper deficit, the enactment of a
carbon tax does not, and should not, change it. So if the current judgment, right or wrong, is that the federal government should be 19%
of the economy, the enactment of a carbon tax should not alter this percentage. Similarly, whatever the decision is on the proper degree
of progressivity of the tax system, the enactment of a carbon tax should not, and need not, change these views. Under this argument,
carbon tax revenues should be used to reduce other taxes in a way that retains the same degree of progressivity.
3. Carbon taxes should be offset by decreases in the income tax

First, the proposed carbon tax is a substitute for other taxes, not an addition to them. For example, an individual's average income tax
rate might be twenty percent, and that individual might use seven percent of his or her income for carbon products. That individual
would be no worse off after taxes, if a carbon tax increased the cost of the carbon products by five percent of that taxpayer's income
(from seven percent to twelve percent of income), so long as the average rate of the income tax were lowered by five percent (from
twenty percent to fifteen percent). In this situation, the extra cost of the carbon tax would be offset by the reduction in the income tax.
4. We can use carbon tax revenue to offset payroll and corporate taxes
Eli Lehrer, journalist, Better than Regulation, WEEKLY STANDARD, 111014, www.weeklystandard.com/article/betterregulation/817782, accessed 1-9-16.
For those on the right who do support a carbon taxprimarily conservative and libertarian-leaning economists like Gregory Mankiw,
Kevin Hassett, and Irwin Stelzera primary attraction is the opportunity to use carbon tax revenues to cut taxes on productive activity,
like labor and investment, and instead substitute a price on externalities that hurt the public. Adele Morris of the Brookings Institution
has shown how a very modest carbon tax could easily help the United States bring its highest-in-the-world corporate income tax rates
down to around the average for wealthy nations without eliminating the research and development tax credit and other widely supported
tax breaks. The centrist environmental think tank Resources for the Future has done excellent work on how it might be used to cut
payroll taxes.
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Carbon Tax Desirable: MechanismPhase-In

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Carbon taxes should be phased in

The carbon tax should be phased in over several years, with low initial rates that slowly but substantially increase, to allow both
consumers and producers to adjust gradually to the new system. Old energy-intensive personal and business investments will lose their
value under a system of carbon reduction. However, allowing time for the change will permit the value of the old investments to be
recovered through depreciation because they will be used for a period not much shorter than their normal useful life. That useful life, it
may be noted, will already be shortened by the increasing prices of energy, which will in many cases make old investments
economically impractical well before their physical useful lives are exhausted. As a matter of both politics and equity, it would be
unwise to impose windfall losses unnecessarily. The mirror image of phasing out the old is developing and implementing the new. It will
take time to develop and create the ability to mass produce new energy-efficient products and processes, and one would not want
unnecessarily large and sudden windfall gains to those who own such assets. A carbon tax enacted with low initial rates, but with steady
and eventually substantial rate increases, would allow a smooth and fair transition from our current system to one much less carbonintensive. Even after an initial phase-in, carbon tax rates should continue to rise to promote further reductions in carbon emissions.
Ultimately, these rates may be expected to become high enough to virtually eliminate net carbon emissions, so that the current high
levels of carbon dioxide in the atmosphere can begin to return to normal. Thus, ideally the carbon tax yield eventually will decline, even
though the rates will have become quite high, because net carbon emissions will have been reduced significantly.
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Carbon Tax Desirable: MechanismReinvestment

1. A reinvestment-oriented tax will cut greenhouse gas emissions, help the economy, and be modeled by other
countries
Stephen Sewalk, Assistant Professor, Daniels College of Business, University of Denver, Carbon Tax with Reinvestment Trumps Capand-Trade, PACE ENVIRONMENTAL LAW REVIEW v. 30, Spring 2013, p. 617-619.
The need for a climate change policy that truly addresses the issue of climate change is increasingly evident. A carbon tax system is the
best approach for the United States due to the simplicity of the design and ease of implementation, cost certainty, price stability, and the
ability to generate revenue for the public good. However, a carbon tax must as-sure reductions in GHG emissions, and must target all
polluters. Until now, there has not been a carbon tax capable of these requirements. Literature argues that the cap-and-trade system is the
superior choice because of the historical successes of the system. As stated, the U.S. acid rain program is one of those cited examples,
but in reality, this is a poor example. We have never had an economy-wide cap-and-trade system. Currently, the EU-ETS is the only
comparable wide-range cap-and-trade example. However, it would be unwise to enact a cap-and-trade system based on the flawed capand-trade system adopted by the EU. Conversely, our nation is very experienced with economy-wide excise taxes. In his tax bill,
Congressman Larson simply added three new, relatively short sections to the existing excise tax section of the Internal Revenue Code.
With regards to carbon cap-and-trade, there is no adequate piece of legislation. Previous proposals have shown just how difficult it is to
draft a bill for cap-and-trade, and even if a bill were to be flawlessly designed, it is suggested that it would take at least two years to get
the program through Congress and set up for implementation because of the delays in rulemaking. A carbon tax, utilizing the existing
excise tax laws, could basically be enacted tomorrow. We have already delayed our efforts to combat climate change, and we do not
have the time to continue the delay by attempting to surmount all the obstacles set out by cap-and-trade legislation. Immediate action can
only be achieved by a carbon tax. The carbon tax with reinvestment implements a downstream tax so that no person will be exempt from
taxation. The revenue produced by the tax will be used for the immediate construction of low-or non-emitting power sources like
nuclear, geothermal, wind, and solar facilities. With the creation of new, clean energy sources, the environment will benefit from the
guaranteed emission reductions. The public will benefit from the cheap energy prices that will arise from the new infrastructure. The
economy will benefit from the creation of new jobs, and the nation will set a great example that will be followed by those nations that
wish to continue exporting to the United States. Because the successes of the tax will encourage other countries to implement similar
regulations, the carbon tax with reinvestment goes beyond domestic emission abatement and offers a global solution to climate change.
2. Carbon taxes can be used to invest in clean energy

A carbon tax is not the only thing thats needed to win the fight against climate change. The tax will be much more effective if paired
with additional investments in clean energy infrastructure both domestically and abroad. Using the revenues accrued from the carbon tax
could allow us to make those additional investments. The Center for American Progress has previously estimated that in order to address
the climate crisis, we need to spend about $20 billion annually on researching, developing, and deploying clean energy technologies,
reducing emissions in challenging sectors such as forestry, and meeting our international climate commitments to assist developing
nations with their pollution reductions. The exact mix of investments should evolve over time to reflect the impacts of the carbon tax and
ongoing developments in clean energy technologies. Generally, though, the spending should be a mix of direct grants, tax incentives, and
credit support for deployment of renewable energy technologies, all of which can be cost-effectively targeted to meet specific needs.
This spending should be adjusted annually to recognize the impact of an increasing carbon tax on the competitiveness of clean
alternatives and the interactions with other policies, such as state renewable portfolio standards or a federal clean energy standard. There
is also a great need to repair and replace critical transportation and water infrastructure that helps communities deal with the impacts of
climate change. Some portion of the revenues from the carbon tax could be directed toward these sectors. These investments have the
benefit of being good for the economy. Research shows that infrastructure investments are one of the most effective ways to spend
public money to drive growth. In this case, the infrastructure investments would put people to work in labor-intensive sectors such as
renewable energy and energy efficiency.
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Carbon Tax Desirable: MechanismReinvestment [contd]

3. Reinvestment can cut emissions and be compliant with global trade rules
Climate change is a significant problem that society must address in the upcoming years. However, through looking at the history of the
issue, it is apparent that multilateral agreements often fall short in creating quantifiable restrictions and making a practical difference.
Therefore, countries must look to unilateral actions to address the issue. These unilateral actions must be able to function within the
international framework however, and therefore must be compliant with WTO regulations. The CTR is a forward-looking option that not
only complies with WTO regulations, but also will affect how the world looks at GHG emissions. The CTR changes common
perspectives regarding how to solve climate change by demonstrating that not only is it affordable, but it can be done in an efficient and
effective manner. Furthermore, a CTR can significantly reduce emissions by proactively building new clean power plants and reducing
the supply of total GHG emissions. A CTR will also encourage other countries to adopt it, much like the VAT (where rates vary from
three to twenty-two percent), which was initially adopted by Denmark in 1967, quickly followed by other countries in the European
Union, and later adopted by over 150 countries. The other countries will do so to reduce their total GHG footprint in order to remain
competitive in international markets.
4. Carbon taxes are superiorcan invest the money in alternative energy

The global climate change crisis will not be resolved simply by implementing a carbon tax or a cap and trade system-or by any other
legislative approach. Fundamental changes in energy production, development, and conservation, as well as changes in transportation,
land use, and natural resource policies, must be pursued alongside efforts to reduce carbon dioxide emissions. An effective carbon
mitigation strategy, however, will be the centerpiece of any successful program to combat global climate change. While the widespread
embrace of cap and trade is a positive development after decades of inaction, before we move forward we should pause to consider
whether a cap and trade system is the best approach to combating global climate change. This Article demonstrates that a better response
to global climate change would be a carbon tax that is adjusted over time to achieve the necessary reductions in carbon dioxide
emissions, as well as the corresponding improvements in alternative energy sources and land and resource management practices that are
essential to conserving our planet for future generations.
5. Carbon tax revenues can be used to fund alternative energy development

We agree that regressive effects must be addressed but otherwise would use revenues from the carbon tax to provide tax credits for
alternative energy development and more energy-efficient motor vehicles, since the positive externalities that result from such research
and development means that funding is likely to be undersupplied by the private sector even with a carbon tax in place. Revenues could
also be used to support carbon sequestration projects and other projects that reduce greenhouse gas emissions, like mass transit and green
building. Segregating the revenue from a carbon tax and using the proceeds to support further greenhouse gas reductions is justified
because it reduces Benefit Uncertainty, which is the most serious drawback of a carbon tax compared to cap and trade. In addition,
segregating the revenue is likely to reduce some political opposition to raising taxes in general, at least to the extent that such opposition
is based on the perception that government is wasteful.
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6. A reinvestment scheme would significantly bolster job growth
Stephen Sewalk, Assistant Professor, Daniels College of Business, University of Denver, The EU-27, U.S., U.K., and China Should
Dump Cap-and-Trade as a Policy Option and Adopt a Carbon Tax with Re-investment to Reduce Global Emissions, SUFFOLK
UNIVERSITY LAW REVIEW v. 47, 2014, p. 559.
The reinvestment of an implemented carbon tax would have a significant impact on job creation. First, the revenue from the tax is used
to update old power facilities and establish new low-to-no emissions facilities that will require a number of new construction jobs. The
EU, United States, United Kingdom, and China could anticipate creating a minimum of 11,000 new direct construction jobs for each
billion dollars of tax-created revenue. These jobs would create an instant boost to any economy and functionally uplift the entire
construction industry. Also, after the initial construction of the facilities is finished, additional jobs will be created for maintenance and
operation of these greener facilities. This ensures that there will not be a drop in long-term employment numbers when the older
facilities are retrofitted. Studies have shown the number of jobs actually increases when low-to-no carbon facilities are operated instead
of their higher-polluting counterparts. This two-pronged employment benefit allows the CTR to have an immediate and lasting effect on
economies that implement the approach.
7. Reinvestment is the best optionwill produce many benefits for society as a whole
A carbon tax with reinvestment is fundamentally simple. A tax starts at $ 5 per ton of carbon contained within the product based on
emissions intensity. The tax is measured at the source, but carried downstream and paid at the register. Based on emissions intensity,
everyone is an emitter and therefore no one is exempt from the tax. Then every year the tax rate increases by $ 5 per ton of carbon.
Despite an analysis remarking on the ability of increasing taxes to reduce future-and short-term emissions, the carbon tax with
reinvestment does not rely on public option to reduce GHG emissions. The assumption that taxation will encourage voluntary innovation
in the power sector is not sufficient. To assure emission reductions, the revenue from the tax will be channeled to building new
infrastructure for energy production. Current power plants will be replaced by nuclear, geothermal, solar, and wind facilities, among
others. There will be no added expense for the utilities, as they will not be the ones bearing the cost of construction, and neither jobs nor
production will be lost. In fact, the construction of new infrastructure will create jobs, and the tax collected will pay to replace existing
high emission power plant utilities. Replacing high emission power plants with low-to-no emission power plants will rapidly force
emissions down. Over time, revenues will decrease even though the tax is increasing because the newly built, non-emitting energy
facilities will not carry a carbon tax, and energy prices will continue to drop. In twenty years, the United States could achieve a 38.67%
to 74.91% reduction in carbon emissions across the building and utilities sector. Carbon tax with reinvestment will bring about an
extreme payout for all U.S. citizens. This payout will come in the form of clean and cheap energy as the tax progresses and clean energy
infrastructure takes over. Also, regional disparities will be corrected by targeting those coal-reliant areas with the first bouts of
infrastructure construction. The dirtiest coal plants will be the first to be replaced.
8. Recycling the revenue ensures job gains

Ryan Egly, engineer, Want Solar and More Jobs? Support a Carbon Tax, THE TENNESSEAN, 11514,
www.tennessean.com/story/opinion/2014/11/05/solar-jobs-support-carbon-tax/18440275/, accessed 1-9-16.
If the playing field were even between clean and polluting energy, clean would have carried the day long ago. But it isnt. The
catastrophe that we are living through as the result of increased greenhouse gases in our atmosphere is captured nowhere in the pricing
mechanism for fossil fuels. A recent report by the World Wildlife Fund cites that 50 percent of the earths wildlife has disappeared in the
past 40 years. This is one of an endless number of figures that justify the use of the word catastrophe. But there are ways to level the
playing field, one of the most practical of which is a fee and dividend tax on carbon. It is not only a market-based solution that will drive
grid parity for clean energy, but it also creates more jobs than are lost in the polluting energy sectors. As mentioned in a previous article,
the REMI Carbon Tax Study is the key to understanding how a tax could both facilitate our energy shift and create more jobs than it
makes irrelevant. The central idea is this: 100 percent of the revenue generated by the tax (the dividend) is returned to households, which
drives consumer spending. No additional government programs are created, and there is no pot for politicians to grab from for special
interests. The jobs created from this influx far outweigh losses in low-labor energy sectors, such as coal and oil.
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9. Reinvestment will spur green energy development
A carbon tax with reinvestment maintains the ease of implementation and enforcement of previously discussed carbon taxes, and the
progressive increase of the tax allows the market to adjust to the price change. This tax with re-investment would produce revenue that
would be used for the immediate construction of alternative energy production. Since the tax could become effective almost
immediately, the carbon tax with reinvestment would be the quickest way to reduce GHG emissions. With the instability of energy
prices and the economic recession occurring across the nation, proposals for additional taxation weighs heavily on the American people.
The cap-and-trade system will act just like a tax, and, as stated, the political advantages of the cap-and-trade system are deceptive. Both
cap-and-trade and carbon tax approaches will initially affect energy prices. The difference, however, is that this car-bon tax's
reinvestment guarantees that the energy prices will fall significantly as alternative energy projects continue to be built at no cost to the
utilities.
10. Reinvestment approaches will boost the economy while cutting emissions
The objective of the carbon tax with reinvestment is what makes this tax so much more appealing and feasible in combating climate
change. The carbon tax with reinvestment starts low ($ 5/ton), increases annually until it reaches $ 50/ton to allow the construction
market to adjust, the revenues peak and then begin to decline rapidly as emissions decline. As stated, excise taxation is not a new
concept for the United States. For this reason, no new organizations will be created for tax regulation purposes. The carbon tax with
reinvestment will be implemented and regulated by the IRS and the EPA, using the existing, knowledgeable staff. Our economy and
lifestyle are dependent on infrastructure and energy. A properly structured tax on carbon with the goal of building a new energy
economy would protect our economic and national interests, create many jobs, and result in significant decreases in GHG emissions.
Previously proposed carbon taxes did have "benefit certainty" because the price of emissions could not guarantee that emissions would
be reduced. A carbon tax with reinvestment does not rely on public accountability for carbon emission reductions. Instead, it relies on
the construction and development of clean, alternative energy power plants for the reduction of GHG emissions. Until now, there was no
obvious advantage to either system; one had to choose "cost certainty" or "benefit certainty." A carbon tax with reinvestment has both.
For this simple reason, we would be foolish not to immediately enact this tax.
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Carbon Tax Desirable: MechanismReinvestment (CCS)

1. Carbon tax credits can be used to encourage carbon capture / sequestration technologies (CCS)
Another important aspect of carbon taxation would be the extent to which credits should be allowed for carbon capture - i.e., for
activities that remove CO2 from the atmosphere. For example, a coal-fired electric power plant would have indirectly paid a tax on the
coal it consumed. It could earn a refundable credit if it creates systems to capture the carbon dioxide produced by burning the coal, rather
than release the carbon dioxide into the atmosphere. Ide-ally, such a credit should be allowed so that the reduction in carbon use will be
less drastic but net carbon emissions will still significantly decline. Before the law authorizes such a credit, there should be confidence
that the carbon is in fact very likely to be immobilized indefinitely. There are various possible immobilization technologies. Carbon
dioxide might be trapped underground. Under high pressure, carbon dioxide condenses from a gas to a liquid, and the liquid form is
much denser and less mobile than the gas, so it can be injected into porous rock formations that are capped by non-porous rock - perhaps
rock formations from which natural gas or petroleum has been extracted. Because rock formations have confined naturally occur-ring
CO2 and methane for millions of years, they should be able to confine sequestered carbon. Nevertheless, it will be necessary to
determine which formations are appropriate. A possible problem with this technology is that if the mineral rights have been severed from
the surface ownership - as has occurred in many areas - it may be unclear to whom the rights to the porous rock formation belong.
Another possible immobilization technology is to encourage algae growth in the ocean. This would allow algae to soak up carbon
dioxide through the process of photosynthesis, which could be encouraged by adding to the dissolved iron content of the surface waters.
These algae blooms, however, may block sunlight and absorb oxygen needed by other wildlife. This process may remove carbon dioxide
indefinitely, but this result would seem to be achieved only to the extent that the algae sinks to the bottom of the ocean - whether as
algae or incorporated into skeletons of wildlife higher up the food chain - and does not decay. Forests recapture carbon through the
process of photosynthesis, as the trees combine carbon dioxide with water to produce cellulosic compounds. Yet forests may be cut
down, and forest fires are a normal part of a forest's life cycle. Each of these events risks a return of the carbon dioxide to the
atmosphere. Only a large forest with limited logging and at least moderate fire suppression is likely to be an effective long-term "carbon
sink." However, forests grown on a sustainable basis for fuel use or carpentry would likely be exempt from the carbon tax. Some
products of petroleum could be considered so long-lived as to qualify under a system of carbon capture. Asphalt for roads might be such
a use, as might some plastic products with long-lived uses. There is a recent proposal to use CO2 to make calcium or magnesium
carbonate by bubbling the CO2 through seawater, then using the calcium carbonate as aggregate in concrete that should last indefinitely.
Upon further investigation, this proposal may be proven to be a satisfactory method of recapturing carbon. Ideally, there should be
credits for carbon capture, if there are appropriate technologies and the means to monitor and control them, and if we can be confident
that such technologies and means are effective.
2. Linked tax credits could make CCS economically feasible

a Carbon Tax, HARVARD ENVIRONMENTAL LAW REVIEW v. 33, 2009, p. 537-538.
We have noted above in several places the need to provide credits for activities that permanently sequester carbon. Carbon capture and
storage ("CCS"), for example, is a much discussed technology to capture CO(2) emissions from coal combustion in electricity
generators. The CO(2) is compressed, liquefied, and transported to a geologically desirable location where it is permanently stored
underground. The technology for CCS is well understood and CO(2) is injected underground now as part of enhanced oil recovery
methods. While it is clear that CCS works in single applications, little is known about the potential to scale the technology up to levels
that will be required given our current and projected coal consumption. No existing projects are associated with coal production, as the
United States faces many obstacles in developing a major CCS program for coal, such as finding adequate and safe storage sites for large
volumes of carbon dioxide and developing a pipeline system for transporting it. One study has estimated that a price in the neighborhood
of thirty dollars per ton of CO(2) begins to make CCS economically viable, assuming that the various technical, regulatory, financial,
and political obstacles can be overcome.
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Carbon Tax Desirable: MechanismReinvestment (CCS) [contd]

3. A small portion of the revenues should be directed towards CCS and other technologiesthe tax should be
neutral otherwise
Some funding will also be needed to move advanced technologies, such as carbon capture and storage ("CCS"), to a large scale. The
recent setback in funding for FutureGen is unfortunate and speaks to the large financial risks facing firms that try to undertake such
investments on their own. CCS illustrates another set of issues requiring government action. A national CCS system will require a
network of pipelines to move carbon from generators to storage sites. This may require some funding by the government. Similarly, lowcarbon sources of energy, such as wind, may not be located near population centers, which means that an enhanced transmission grid
may be required. Given the complex regulatory and land use issues in building such a grid, federal involvement and funding may be
necessary. In addition, enhanced support for energy efficiency investments contributes to a reduction in energy consumption and carbon
emissions. Increasing energy prices through a carbon tax will contribute to increased efficiency investments, but two factors would
support a policy of further stimulating efficiency investments with more generous tax credits. First, certain sectors of the economy may
not respond to energy price increases arising from a carbon policy. Commercial real estate and rental housing are sectors where the
economic agent who makes efficiency investments (the developer or property owner) is not the person who benefits from the energy
savings (the tenant). Second, the hid-den nature of many efficiency improvements makes it difficult to recapture the energy savings
through their capitalization into building prices or rents. In addition, empirical work suggests that efficiency investment tax credits have
a substantial impact on adoption of such efficiency investments. In summary, we believe that, in large measure, funds from a carbon tax
should be used as part of a "carbon tax swap" that is revenue and distributionally neutral. A small portion of the funds might be directed
to providing transition relief for displaced workers (such as miners), supporting basic energy research and development, solving vexing
issues associated with bringing CCS to scale, constructing any necessary transmission lines, and perhaps encouraging conservation
activities that market imperfections might otherwise block. But we reiterate that the decision about how to spend carbon tax revenues is
separate from the decision to enact a carbon tax.
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Carbon Tax Desirable: MechanismUpstream

1. Upstream taxation would be most efficient
With respect to the tax base, we show that collecting the tax upstream would make it possible to accurately and cheaply cover 80% of
U.S. emissions by collecting the tax at fewer than 3000 points, and that it would be possible to cover close to 90% of U.S. emissions at a
modest additional cost. As the base gets broader, the collection costs in-crease; the tradeoff between the increased collection costs and
the benefits of a broader base determines the optimal tax base. The main problem presented by upstream collection is that a tax credit or
offset must be given for fossil fuels that are not combusted. For example, if the tax is imposed at the refinery and some distillates are
sequestered into products such as asphalt, the tax will be too broad. We discuss how such a credit system would be designed.
2. Upstream fossil fuel taxation would be a relatively simple process

Fossil fuels made up approximately 80% of all U.S. emissions in 2006. Most developed countries have a similar pro-file. Developing
countries will tend to have higher emissions from agriculture and deforestation, so considerations of how to include those activities in
the tax base will be more important for developing countries. There are two principles, one physical and one economic, which allow the
collection and enforcement costs for a tax on emissions from fossil fuels to be relatively low. The first is that a unit of fossil fuel will
emit the same amount of carbon regardless of when or where it is burned. For carbon emissions from fossil fuel combustion, there is an
almost perfect correspondence between input and output. Therefore, it is possible to tax the input -- the fossil fuel -- rather than the
output -- the emission. The primary exception to this rule is for fossil fuel permanently sequestered, such as fuel used for tar or carbon
that is captured and stored. This issue is discussed in Part IV. The second principle is that the incidence of a tax and its efficiency effects
are unrelated to the statutory obligation to remit the tax. This means that, in deciding where to impose the tax (choosing the remitting
entity), one can focus on minimizing collection and monitoring costs while ensuring maximum coverage. In general, imposing the tax
up-stream (i.e., at the earliest point in the production process) will achieve these goals because (1) there are far fewer up-stream
producers than there are downstream consumers and (2) the cost will be lower per unit of tax due to economies of scale in tax
administration.
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Carbon Tax Desirable: Multiwarrant / General

1. A carbon tax will cut emissions, cover budget deficits, and spur private investment
Robert H. Frank, Professor, Economics, Cornell University, Carbon Tax Silence, Overtaken by Events, NEW YORK TIMES, 8
2512, www.nytimes.com/2012/08/26/business/carbon-tax-would-have-many-benefits-economic-view.html, accessed 1-5-16.
The good news is that we could insulate ourselves from catastrophic risk at relatively modest cost by enacting a steep carbon tax. Early
studies by the Intergovernmental Panel on Climate Change estimated that a carbon tax of up to $80 per metric ton of emissions a tax
that might raise gasoline prices by 70 cents a gallon would eventually result in climate stability. But because recent estimates about
global warming have become more pessimistic, stabilization may require a much higher tax. How hard would it be to live with a tax of,
say, $300 a ton? If such a tax were phased in, the prices of goods would rise gradually in proportion to the amount of carbon dioxide
their production or use entailed. The price of gasoline, for example, would slowly rise by somewhat less than $3 a gallon. Motorists in
many countries already pay that much more than Americans do, and they seem to have adapted by driving substantially more efficient
vehicles. A carbon tax would also serve two other goals. First, it would help balance future budgets. Tens of millions of Americans are
set to retire in the next decades, and, as a result, many budget experts agree that federal budgets simply cant be balanced with spending
cuts alone. Well also need substantial additional revenue, most of which could be generated by a carbon tax. If new taxes are
unavoidable, why not adopt ones that not only help balance the budget but also help make the economy more efficient? By reducing
harmful emissions, a carbon tax fits that description. A second benefit would occur if a carbon tax were approved today but phased in
gradually, only after the economy had returned to full employment. High unemployment persists in part because businesses, sitting on
mountains of cash, arent investing it because their current capacity already lets them produce more than people want to buy. News that a
carbon tax was coming would create a stampede to develop energy-saving technologies. Hundreds of billions of dollars of private
investment might be unleashed without adding a cent to the budget deficit. Some people argue that a carbon tax would do little good
unless it were also adopted by China and other big polluters. Its a fair point. But access to the American market is a potent bargaining
chip. The United States could seek approval to tax imported goods in proportion to their carbon dioxide emissions if exporting countries
failed to enact carbon taxes at home. In short, global warming has a fairly simple and cheap technical solution. Extreme weather is
already creating enormous human suffering. If it continues, politicians will have a hard time ignoring the problem when the 2016
conventions roll around. If the recent meteorological chaos drives home the threat of climate change and prompts action, it may
ultimately be a blessing in disguise.
2. Carbon taxes make senseeven Big Oil companies agree

BLOOMBERG VIEW, Editorial, Even Big Oil Wants a Carbon Tax, 6115, www.bloombergview.com/articles/2015-06-01/evenbig-oil-wants-a-carbon-tax, accessed 1-8-16.
Now that six of the world's largest oil companies have essentially come out in favor of a carbon tax, it's getting harder to dismiss the idea
as some kind of outlandish lefty plot. And those companies can help their cause by engaging Congress directly, instead of outlining their
case in a polite letter to the United Nations. None of the companies -- BP Plc, Royal Dutch Shell Plc, Total SA, Statoil ASA, Eni SpA
and BG Group -- is based in the U.S. Still, their argument should resonate in Washington: "Clear, stable, long-term" policies that make
carbon more expensive (the letter never uses the word "tax") are necessary to reduce uncertainty, stimulate investment and encourage the
most efficient reductions in emissions. Only governments can make those changes, they say. And those national systems must eventually
be connected to create a global system. That's the right approach, and it's not surprising that oil producers are advocating it. The current
strategy for reducing emissions of carbon dioxide and other greenhouse gases isn't nearly enough to prevent potentially devastating
changes to the Earth's climate. As the need intensifies for a more ambitious response, so does the challenge these companies face in
planning for them. And the longer those remedies are delayed, the more aggressive they'll need to be. There are two broad arguments
against pricing carbon. One is that climate change is exaggerated, or at least unproven, so a carbon tax is unnecessary. The second is to
concede that climate change is real but that a carbon tax or similar approach would be too disruptive. In their letter, sent to the head of
the UN Framework Convention on Climate Change in advance of its meeting in December, the oil companies reject the first claim
outright and answer the second. They also pledge to work for a change in policy "in our meetings with ministers and government
representatives." In other words: Their lobbying will consist of more than a letter-writing campaign, which is hardly news. Shell spent
almost $15 million in the 2012 election cycle, according to the Center for Responsive Politics, while BP spent $9 million. If Big Oil
wants to change the direction of U.S. climate policy, it's safe to say it can. One example: There is legislation that would impose a price
on carbon starting at $42 per ton. Big Oil could use its clout to advance the bill in Congress and advocate for the idea in the public
debate. It's not as if the opposition to a tax is especially stubborn. A poll last year found that while two-thirds of voters oppose a straight
carbon tax, 56 percent approve if its revenue is rebated to the public. And if the money it raised were used to fund research into
renewable energy, 60 percent approve -- including a majority of Republicans. It's becoming increasingly clear that voters and companies
alike are ready for a carbon tax. Nobody wins by waiting.
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Carbon Tax Desirable: Multiwarrant / General [contd]

3. Oil companies support a carbon tax
Oil companies are pretty much the last ally youd think of when it comes to advancing big-picture solutions to climate change. These are
the companies, after all, whose product is responsible for causing a significant amount of climate change in the first placeand pretty
much every proposed fix for global warming necessarily involves burning less oil. So it came as a bit of a surprise Monday when six of
the leading European oil companies, including BP and Shell, unveiled a letter addressed to the United Nations climate chief calling for a
price on carbon emissions. We believe that a price on carbon should be a key element of ongoing U.N.-led international climate
negotiations, the letter said. This week representatives from nearly 200 countries are meeting in Bonn, Germany, to prepare for a summit
in Paris this winter where they hope to produce a powerful global accord on fighting climate change. The letter called on the worlds
governments to create national carbon markets where they dont exist (like most of the United States, for example), and to eventually
link those markets internationally. As Bloomberg Business pointed out, the letter is unprecedented, in that its the first time a group of
major oil companies have banded together to advocate for a serious climate change policy. It was welcomed by the U.N.s top climate
official, Christiana Figueres, who said that the oil and gas industry must be a major part of the solution to climate change.
4. Carbon taxes will cut emissions and bolster the economy

Ever since climate change became a major public-policy issue, various schemes to tax emissions, either under "cap-and-trade" or a
straight carbon-tax regime, have received significant attention from the political class. Imposing a price on CO2 emissions would allow
society to recover the costs of the externalities produced by energy production and use, and would encourage a reduction in those
emissions. Although many cap-and-trade schemes exist, only a handful of jurisdictions British Columbia, Ireland, and Sweden most
prominently have implemented true carbon taxes. Creating one in the United States nationally and on a revenue-neutral basis
would be a good idea, although not for the reasons many environmentalists believe. Quite simply, a carbon tax would be a good way to
cut taxes on productive activity and free the economy to become more prosperous.
5. Carbon taxes can cut fossil fuel use and raise revenue
Daniel E. Kwak, J.D. Candidate, University of Oregon, Civilizing Society: The Need for a Carbon Tax in Light of Recent Changes to
U.S. Energy Taxation Policy, OREGON LAW REVIEW v. 88, 2009, p. 574.
Implementing the revenue-neutral carbon tax proposed by the CTC would clearly facilitate a decrease in fossil fuel consumption;
however, the government should also adopt this tax to generate revenue for purposes of offsetting the $ 787 billion Stimulus Bill. Using
a carbon tax to generate revenue would be effective because such a tax has great potential to generate large amounts of money. Using the
CTC's federal "starter" carbon tax example, a tax of ten cents per gallon of gasoline would generate approximately $ 55 billion in
revenue per year. Adding successive increases in the tax would exponentially increase the amount of revenue. If the federal government
were to retain even a small portion of the carbon tax revenue, while rebating the remainder back to taxpayers equally, the brunt of the
carbon tax would be shifted to wealthier households and large, profitable corporations and revenue would be generated to help offset the
federal deficit.
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Carbon Tax Desirable: Politically Feasible

1. Support for carbon taxes is bipartisan
A carbon tax is a popular bipartisan tool for reducing the deficit. Think tanks across the political spectrum, including CAP and the
American Enterprise Institute, among others, endorsed a carbon tax in 2011 as part of their proposals to balance the budget. Just like
with progressive tax reform, Congress could include a carbon tax to raise revenue as part of an agreement on deficit reduction. In this
case, the tax may not need to be explicitly linked to deficit reduction as long as the comprehensive budget package deals with this
problem.
2. Exxon and conservatives support a carbon tax

Despite its critics, a carbon tax has garnered broad support even from unexpected places. Exxon Mobils chief executive has supported
a carbon tax. Among conservatives, it has been supported by scholars at the American Enterprise Institute, former Congressman Bob
Inglis (R-S.C.), Gregory Mankiw, an economic advisor to Mitt Romneys campaign team, and Martin Feldstein, a top economist in
Ronald Reagans administration.
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Carbon Tax Desirable: WarmingGeneral

1. Carbon taxes are the best approach to dealing with the problems of climate change
Carbon taxation systems are likely the most effective solution for reducing carbon emissions. It is possible that eventually, if the climate
change issues become too severe, we may have to implement a different system to reduce carbon emissions further (such as commandand-control). We are likely not at that point yet. Carbon taxation systems are likely the least invasive government-implemented system
that will still be effective at reducing carbon emissions. Assuming the polluter is acting rationally (and other basic free market
assumptions), the polluter will reduce carbon emissions to the point where increasing the emissions any further would mean a loss in
profitability. This is the point at which the marginal damages (now internalized as cost through the tax system) would be too severe to
emit above that level. The issue here is making sure we set the carbon tax at the correct economic point so that the damages are
accurately reflected. The proper method for setting the damages is, of course, highly controversial. It is likely we should err on the side
of caution - i.e., set the carbon tax a bit higher - because of the possibility of catastrophic consequences. Carbon taxation systems also
have the advantage of compatibility with other systems that might be implemented (such as cap-and-trade, or command-and-control).
Even though a carbon tax is likely to cause a raise in the price of nearly all goods, it is likely that we have enjoyed an artificially low
price of goods because the damages we are causing are not reflected in those prices. This inevitable result likely accounts for the
unpopularity of a carbon tax in the political arena. In attempt to soften the negative economic effects of a carbon tax (especially as it
relates to the poor), it is often suggested that the carbon tax should be paired with a corresponding subsidy; that is, the money that is
collected from the carbon tax could be reinvested into the industry to help with innovation, or perhaps refunded to the poor in the form
of tax credits to deal with the in-equities potentially created. While this may seem like a good idea, the idea of a double dividend has not
necessarily manifested in other countries implementing a carbon tax. Climate change caused by overuse and over-emission of carbon
dioxide is a multifaceted and complex problem. The solution to such a problem is likely to affect nearly every aspect of our lives (i.e.,
possible reduction in standard of living). A small reduction in our current standard of living may be the small price we all have to pay in
order to have a brighter future. A carbon tax is the first step societies can take in order to ensure the future does not become bleak. If the
government can create the conditions within a society that sends the appropriate price signals to industry that change is needed, rather
than dictating (command-and-control) that change is needed, then the government can leave the solution to the industry most capable of
implementing it. Because a carbon tax creates those conditions and sends the right price signal, it is likely that a carbon tax will push
industry toward the much needed technological solution to the carbon emissions problem. Effectively, this means that the same
industries responsible for creating the carbon emissions problem will eventually be the industries responsible for implementing the
solution leading to a brighter future.
2. We should implement a carbon tax to respond to the challenges of climate change

U.S. Energy Taxation Policy, OREGON LAW REVIEW v. 88, 2009, p. 579-580.
The unfortunate realities of global warming are far too disastrous and threatening to our "civilized society" to war-rant careless
responses. While all carbon-emitting countries are responsible for the worldwide increase in greenhouse gas emissions, per capita
contributions of the United States to global warming far exceed those of most. The burden on Americans to reduce emissions, therefore,
is substantial. Because governments are able to use taxation to promote particular economic behavior on a grand scale, the federal
government should focus its attention on reforming its energy taxation policy. In 1987, the World Commission on Environment and
Development stated: "Environmental regulation must move beyond the usual menu of safety regulations, zoning laws, and pollution
control enactments; environmental objectives must be built into taxation [policy]." Providing credits to taxpayers who invest in energy
property has proven to be an effective way of encouraging energy property development. Allowing taxpayers to claim Treasury grants in
lieu of these credits streamlines the process, further encouraging investments. Awarding credits for property financed by subsidized
energy financing, however, amounts to a double-dip in federal funds and should not be allowed in an era during which the national debt
increases every month. In addition to reintroducing the section 48 limitation, Congress should pass a tax on carbon emissions. Rather
than increasing taxation of income or other positive contributions to the economy, the government should shift its attention to
environmentally harmful activities, and, with the recent passing of the American Recovery and Reinvestment Act of 2009, the timing
may be right for a persuasive appeal to Congress. Political alliances and party promises will remain significant hurdles to gaining public
support for a carbon tax. The bottom line, however, is clear: other countries have become savvy to the need for increased environmental
taxation in energy policy, and it is time for the United States to follow suit.
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Carbon Tax Desirable: WarmingGeneral [contd]

3. Carbon tax would be effective and is the best way to respond to the challenges of climate change
Kevin Book, Senior Vice President, Energy Policy, Oil and Alternative Energy, FBR Capital Markets Corp., Testimony before Senate
Environment and Public Works Committee, CQ CONGRESSIONAL TESTIMONY, 111507, lexis.
It is in this context that I would suggest that setting carbon price through taxation rather than market pricing may improve prospects that
U.S. climate security policies will be both effective and commercially viable. While markets tend to be efficient distribution and pricing
mechanisms for commerce, they also possess characteristics that can inject unanticipated volatility into regulation, particularly when the
governance structure encourages noncommercial traders to enter the market to provide necessary liquidity. The challenges arrive under
conditions of scarcity, a predicament best exemplified by the current price of crude oil. No fundamental analysis or rational assessment
of currency and risk effects can account for $95 crude, and my models suggest an upper- bound risk and currency-effect-adjusted price
should be no higher than $80 per barrel, particularly with troubling economic indicators overhanging demand. But refineries are still
buying oil at a premium due to market dynamics, not fundamentals. Commodity markets frequently distort price under conditions of
scarcity because commercial buyers, whose businesses cannot operate without the commodity in question, are forced to bid up for it at
the same time that noncommercial traders, who generate profits through scarcity, may be reluctant to sell. Ultimately these pricing
dynamics normalize, sometimes with startling downward pressure on price, but the volatility can make it difficult for commercial buyers
to efficiently deploy investment capital. Over the long term, all businesses can respond to price changes, but short-term price volatility
ultimately forces commercial buyers to look for ways to ensure price stability, usually by purchasing the option to buy or sell at a range
of prices in the future. Commercial enterprises pay for these options as a cost of doing business, but the costs of managing potentially
volatile carbon prices might well undermine the public interest goal of reducing emissions at the lowest economic cost to regulated
entities and ratepayers. An emissions option is not an emissions reduction and it provides revenue to its seller whether or not the buyer
exercises it; unlike an allowance or an offset, the option itself does nothing to reduce the carbon dioxide levels in the Earth's atmosphere.
Nor can emitters devote the cost of hedging to needed investment in next-generation technologies. Even when emitters can achieve
financial gains through hedging activities, they still bear the "frictional" costs of commissions and service fees, and businesses that can
generate returns on capital through financial engineering are unlikely to undertake investments in sustainable energy production. The
challenges facing the Kyoto Protocol, where 65% of today's global GHG emissions are not governed by mandatory caps, derive in part
from its market pricing architecture. The use of emissions credits as a proxy currency requires emitters who would be governed by the
caps to value that currency, which is not the case for China, India, Australia or the United States. As unappealing as carbon taxation may
seem from a political standpoint, one of its greatest virtues may stem from the fact that taxes can be assessed in any reference currency
or exchange- adjusted foreign denomination at the moment of any intra- or international commercial transaction. Governments may also
tailor tax regimes to respond to economic conditions faster than they can retire allowances, offsets or any carbon proxy currency.
4. A carbon tax is the best way to change behavior

2008, p. 67.
If economic markets were forced to integrate the cost of environmental externalities caused by carbon emissions into the costs of doing
business, the ensuing price signals and economic incentives would force a dramatic shift toward developing cleaner energy sources and
more sustainable energy habits. Economic consequences will likely be imposed on the industries that created carbon emissions if there is
any hope of effectively reversing the legacy of environmental damage. This Article argues that implementing a tax on carbon dioxide
("CO[2]") imposes economic accountability and would impact the use of precious resources in a more direct, transparent, and
sustainable manner than any pro-posed cap-and-trade program. The critical issue is managing the perceived political consequences of
exercising such policy choices. A carbon tax would directly influence both industry and individual behavior with transparency, fairness,
speed, and balance. Industry would have an economic incentive to reduce their carbon emissions to avoid the tax, which would likely be
a cost passed on to consumers, and thus, the price signals created would modify consumer behavior. Accurate price signals for carbon
(with diminished volatility) will also direct the marketplace so that clean renewable sources of power, energy efficiency, demand-side
management, and combined heat and power technologies enjoy a level playing field with the CO[2]-producing conventional fossil fuel
generation resources. A cap-and-trade system will reward traders, commodities merchants, and financial institutions. An astute use of the
federal tax system can build companies, development of equipment and technology, and ensure that physical investments are made in
sustainable business models.
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5. Warming is a serious threatit can only be addressed by spurring innovation in the energy industry
There is a growing demand for domestic climate change legislation in the United States that will lead to significant reductions in
greenhouse gas (GHG) emissions. A recent publication by the Intergovernmental Panel on Climate Change (IPCC) stated that fossil fuel
consumption accounts for the majority of anthropogenic GHGs. If we fail to make significant reductions in GHG emissions, we are
risking the future of our environment. Global climate change threatens to bring on catastrophic devastation to our entire planet's
resources. This threat has been a major push for climate change legislation in the United States. In order to reduce GHG emissions at the
lowest possible cost, lawmakers need to adopt a climate change policy with economic incentives. To meet the challenge of reducing
GHG emissions, innovation within the energy industry is necessary to promote development in cleaner production. The cost of such
innovation plays a large role in managing this issue.
6. Carbon taxes are an effective way for congress to respond to climate change
U.S. Energy Taxation Policy, OREGON LAW REVIEW v. 88, 2009, p. 572-573.
In addition to reintroducing the section 48 credit limitation, Congress should also introduce a carbon tax. Achieving a substantial
reduction in the amount of CO<2> emissions is essential to reversing the effects of global warming. Introducing a carbon tax into the
Code would be an effective way of furthering that purpose. While passing a carbon tax for global warming considerations would appeal
to environmentalists, the benefit of using the tax as a revenue stream may be the added incentive needed to persuade Congress. One
argument against extending the current tax incentive program for energy property and introducing a refundable tax credit is that this
course of action increases government spending. As current market trends continue downward, this argument against tax incentives
seems compelling. The cost of improving the current program, after all, amounts to a price tag in the billions. These added expenses,
however, could be offset by a tax on carbon. Although countries in Europe have been taxing greenhouse gas emissions for some time
now, the United States has opted to focus on tax incentives to encourage energy-efficient development. Continuing down this road of
solely using tax subsidies to promote energy goals would prove to be unfruitful - it is simply the "path of least political resistance."
Political allegiances and bipartisan debate have been major contributors to this problem. The fact that politicians are more attentive to
voter popularity than they are to economic principles is an unfortunate reality; therefore, it is understandable that politicians opt to favor
policies that reduce gas prices. Economists argue that the implications of this unfortunate fact reveal that U.S. energy policy is not in fact
grounded in economics. A carbon tax would likely be set as a flat tax that accompanies units of a particular type of fossil fuel. For
example, if the federal government passed a tax that charged users ten cents per gallon of gasoline, then individuals or businesses that
purchased and used a gallon would be required to pay a tax of ten cents, regardless of their annual income. This type of flat tax is known
as a "regressive tax" and is a disfavored method of taxation because it burdens lower-income households and smaller businesses more
heavily than higher-income households and larger corporations.
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1. Carbon taxes cut emissionsthe empirical record proves
Urban-Brookings Tax Policy Center, Taxing Carbon: What, Why, and How, Tax Policy Center 615, p. 20-21.
There are several lessons we can draw from other countries experience with pricing carbon: 1. Carbon pricing reduces emissions. In the
three years that Australia had a carbon pricing mechanism (set at $19/metric ton of carbon dioxide equivalent and rising annually),
emissions in affected sectors fell from 1.5 to 9 percent. British Columbia has had a carbon tax set at $26/metric ton of carbon dioxide
equivalent since 2008, and emissions fell around 10 percent between 2008 and 2011. A survey of carbon taxes in Finland, Denmark, the
Netherlands, and Sweden found that all reduced emissions more than if there were no policy changes; the reductions ranged from about
1.5 percent to nearly 6 percent.
2. Carbon taxes will discourage pollution, cutting emissions

Although it is unlikely that Congress will attempt to pass federal cap-and-trade legislation again in the near future, there are alternatives
to putting a price on carbonincluding the carbon tax, which is getting significant attention today from lawmakers and thought leaders
across the political spectrum. The basic mechanics of a carbon tax are very simple: A tax is assessed on each ton of greenhouse gas
pollution, the tax is paid to the government, and the government uses the money for either targeted spending or general usage. The tax
will discourage pollution, therefore discouraging the use of fossil fuels while promoting cleaner energies. It can be increased over time to
continue incentivizing polluters to lower their emission rates.
3. A carbon tax is the best thing we can do to address climate change

Christian Parenti, Professor, Sustainable Development, School for International Training, Graduate Institute, A Radical Approach to the
Climate Crisis, DISSENT, Summer 2013, www.dissentmagazine.org/article/a-radical-approach-to-the-climate-crisis, accessed 1-1-16.
Environmental economists tend to agree that the single most important thing the United States could do to accelerate the shift to clean
energy would be to impose a carbon tax. Despite our political sclerosis and fossil fuel fundamentalism, the means to do that already
exist. First and foremost, there is the Environmental Protection Agency, which could achieve significant and immediate emissions
reductions using nothing more than existing laws and current technologies. According to Kassie Siegel at the Center for Biological
Diversity, The Clean Air Act can achieve everything we need: a 40 percent reduction of greenhouse gas emissions over 1990 levels by
2020.
4. Australia shows that carbon taxes cut emissions

Most environmental economists and policy wonks agree that making companies pay for their carbon pollutionwhether through a tax or
a cap-and-trade systemis a fundamental step for any meaningful reduction in greenhouse gas emissions. The basic idea is that making
carbon pollution expensive will drive big polluters to clean up. Policies like this are already gathering steam across the globe, from
Canada to China. (California and a few Northeast states have regional carbon markets, but a national carbon price is still a nonstarter in
the U.S. Congress.) Recently Australia demonstrated just how effective carbon pricing can be, in a counterintuitive way: Carbon
emissions dropped immediately after the country implemented a carbon tax, then jumped right back up when the tax was repealed.
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Carbon Tax Desirable: WarmingEmissions Cuts (General) [contd]

5. Carbon tax with reinvestment will definitely cut emissions
Existing carbon tax proposals, and especially existing cap-and-trade proposals, are not capable of reducing carbon emissions with
certainty. New regulation must be proactive in nature, include all emitters, and guarantee real reductions in carbon emissions. A better,
more effective market-based approach for reducing carbon emissions is a carbon tax with reinvestment. This carbon tax with
reinvestment would directly tax all carbon emitters through a downstream approach, as opposed to cap-and-trade's limited upstream
proposals. This tax accounts for the societal costs of carbon emissions, and through this accountability promotes emission reductions just
like cap-and-trade. However, the reinvestment part of the tax will offset any doubts regarding the social responsibility requirement of
emission reduction proposals. The monetary payment of a carbon tax is a payoff of the environmental and societal costs imposed from
emitting carbon, and sends the message about the harm of carbon emissions. If that is not clear enough, the carbon tax's reinvestment
into the immediate construction of environmentally friendlier energy production facilities will further emphasize this message.
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Carbon Tax Desirable: WarmingEmissions Cuts (Efficiency / Cost)

1. A carbon tax is the most efficient way to decrease greenhouse gas emissions
The primary environmental objective of a tax on carbon is to set a price that reflects the real costs such emissions imposeaccounting
for the damages that are expected to arise from global warming, including effects on agricultural productivity and human health, coastal
inundation, and other changes. Experts suggest that a carbon tax will produce the most efficient carbon reductions throughout the
economywhether from electricity production or transportationbecause as a uniform price on CO2 emissions, the tax is the same
regardless of source of the emissions.
2. Carbon taxes will encourage businesses to find the cheapest way to cut emissions
Eli Lehrer, journalist, Better than Regulation, WEEKLY STANDARD, 111014, www.weeklystandard.com/article/betterregulation/817782, accessed 1-9-16.
A carbon tax, properly constructed, could encourage energy producers to find the lowest-cost ways to reduce carbon dioxide emissions
while leveling the playing field for energy sources like nuclear, wind, solar, and hydro. A first step might be for the EPA to allow states
flexibility to pursue their own carbon taxes in lieu of subjecting themselves to new greenhouse gas regulation. Such an approach could
prove a hugely attractive political option for Republican office-seekers, who would be able to promise cuts to state income, property, or
sales taxes, while giving the boot to EPA busybodies. In private discussions, OMB officials have made positive noises about the
possibility of allowing this to happen under the current law, and states including Virginia and Washington have discussed the possibility.
Rep. John Delaney (D-Md.) has introduced a bill that would make state-level carbon taxes an option.
3. Carbon taxes are the most efficient way to solve carbon emissions
One can compare a carbon tax to other ways of controlling GHG emissions. A carbon tax that is consistent with a reasonable estimate of
the marginal social damage from GHG emissions enhances economic efficiency by changing prices to more fully reflect the social costs
associated with fossil fuels. In addition, studies have demonstrated that a tax is more efficient than command-and-control regulation in
controlling carbon. A carbon tax is more efficient than a command-and-control regulation because it encourages many ways to reduce
emissions at least cost, including through energy conservation and fuel switching in power plants. In addition, a federal carbon tax would
allow state- and local-level programs to reduce emissions further. In contrast, under a federal cap-and-trade system, additional GHG
efforts in some states could free up allowances to allow greater emissions in other states.
4. Carbon taxes can cut emissions for minimal cost

LOS ANGELES TIMES, editorial, Time to Tax Carbon, 52807, www.latimes.com/opinion/editorials/la-ed-carbontax28may28story.html#page=1, accessed 1-1-16.
And yet for all its benefits, cap-and-trade still isn't the most effective or efficient approach. That distinction goes to Method No. 3: a
carbon tax. While cap-and-trade creates opportunities for cheating, leads to unpredictable fluctuations in energy prices and does nothing
to offset high power costs for consumers, carbon taxes can be structured to sidestep all those problems while providing a more reliable
market incentive to produce clean-energy technology.
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Carbon Tax Desirable: WarmingHuman Caused

1. Human activity is almost certainly responsible for global warming
Second, human activity is almost certainly the most important cause of the warming. Naturally occurring climate cycles have clearly
played a role, but human activity, particularly emissions of greenhouse gases, have played a significantly larger one. It has been known
since the 19th century that carbon dioxide and other greenhouse gases like methane, nitrous oxide, and ozone can trap heat. Emitting
more of these gases into the atmosphere increases its heat-carrying capacity. While all land-based animals emit CO2 with every breath
they take, plants are the main repositories of it. Over very long time horizons, plant matter transforms into the fossil fuels oil, gas, and
coal. When these fuels are burned, the CO2 from ancient flora is finally released into the atmosphere; the more fuel we burn, the more
CO2 gets released. There have always been natural fluctuations in global temperatures, of course, and not all natural cycles warm the
earth. Major volcanic eruptions, for example, have a significant cooling effect that, over short periods, can outweigh the general
warming trend. But the recent overall trajectory is still unmistakable. While natural factors can have significant short-term impact on
climate, they are sufficiently infrequent and scattered that they cannot be considered the "cause" of the observed climate change, nor can
they explain the recent warming trend. Neither can solar activity, El Nio, or any other factor independent of humans. Since the upward
trend in temperatures has tracked the concentration of CO2, evidence for the hypothesis that rising CO2 concentrations impact
temperature is nearly unassailable. While most publications in climate science do not advance any hypothesis on the causes of global
warming, of those that do, the vast majority endorse a human cause, as does the IPCC and every major academy of science in the world.
This doesn't mean, as some environmentalists claim, that the science is "settled." It is correct to say that we don't know exactly what is
causing climate change, and expressing uncertainty, as politicians like Mitt Romney have, is not the same thing as denying that climate
change is real. Indeed, almost every scientist and climate-change activist inside or outside of the scientific community and even most
of those labeled "climate deniers" by the environmental movement agrees with the premise that the earth has warmed and that
humans have contributed to that warming through CO2 emissions. Even the bte noire of the environmental movement, philanthropist
Charles Koch, said so in an interview with USA Today in April 2015.
2. Human activity is likely responsible for climate change

TAX LAW JOURNAL v. 15, 2015, p. 270.
Climatologists have recently observed an increase in average temperatures across the globe. This phenomenon can be called global
warming; however, climatologists often refer to this phenomenon as climate change, because the term climate change has broader
meaning, encompassing other effects besides simply rising temperatures. Whatever the terminology, the problem is becoming clear,
human influence is very likely causing an increase in average global temperatures through the release of greenhouse gas emissions, such
as carbon-based emissions.
3. Human activity contributes substantially to climate change

The majority of GHG emissions are caused by natural events; however, the environment in a delicate balancing process absorbs these
emissions. The rapid increase in atmospheric levels of GHGs over the past one hundred years has been caused by rapidly increasing
anthropogenic emissions, which are directly related to human activity, commonly referred to as "anthropogenic forcing." The two
leading causes are deforestation and burning of fossil fuels, which include fuels burned for transportation, manufacturing, electricity
generation, and buildings, among others. These are all causes that are directly related to human activities.
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Carbon Tax Desirable: WarmingHuman Caused [contd]

4. We can be certain that humans are to blamemultiple reasons
Objection - It is Not Certain that Human Factors are the Cause of the Problem. The idea behind this objection is that if climate scientists
are uncertain of whether human factors are the cause of the climate change issue, then it is likely that they will also be uncertain of
whether humans can influence the climate sys-tem at all, thus interfering with our capability of discovering a solution. There are a
number of reasons that this objection is not persuasive. First, as the precautionary principle advises we ought to act, even if we aren't the
cause of the problem and even in the face of some uncertainty. Second, as the evidence has already shown, an overwhelming majority of
climate scientists believe the source of the problem to be human activities, thus giving us hope that at least by reducing those activities
we can make a difference. Third, scientific certainty is never a guarantee, in fact the best available report we have from the IPCC only
gives ranges or degrees of certainty based on the quantity and the quality of the evidence available. Fourth, by waiting we may reach the
"tipping point" of rising temperatures.
5. The scientific consensus says that warming is real and human-caused

Advocates opposed to the idea that climate change is occurring have sometimes confused the climate change issue by referring to claims
made by "climate science" and by claiming that climate science is uncertain. The popular media has also contributed to much of the
confusion about climate science. Nevertheless, with the current available science, there is a near 97 percent agreement among
climatologists - those who devote their available time to studying climate science issues - that the earth, on average, is getting warmer
and that this increased temperature is "very likely due to human activities".
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Carbon Tax Desirable: WarmingJustifies Action

1. A failure to act risks massive devastation from unchecked climate change
UNIVERSITY LAW REVIEW v. 47, 2014, p. 527-528.
Failure to reduce global greenhouse gas (GHG) emissions is not an option. If we fail, then we risk the future of our environment and
threaten catastrophic devastation to our coastlines, cities, farms, and the entire planet's resources. The changing climate, due to manmade emissions, could very well significantly alter the landscape and characteristics of planet Earth. With "very high" confidence, the
bulk of the rise in temperatures over the past fifty years, according to climate scientists, can be attributed to human-caused GHG
emissions from burning fossil fuels combined with land-use changes. Yet, inaction seems to be the word of the day. Emissions of global
GHGs continue to grow. Hope continues to present itself at every Conference of the Parties (COP) meeting, yet disappointment soon
follows, as the Kyoto, Copenhagen, Durban, and other COP meetings all have failed to produce a reduction in total emissions. The
Intergovernmental Panel on Climate Change's (IPCC) fifth assessment report indicates significant legislative action is needed to control
emissions. Thus, there is growing demand for action on domestic and international climate change legislation leading to significant
reductions in GHG emissions. The past fifteen years have seen the twelve warmest years in recorded history as oceanic temperatures
reached record highs and Arctic ice melted faster than most models predicted. A recently conducted study by the Proceedings of the
National Academy of Sciences, covering a fifty-year period, discovered the higher temperatures caused by climate change are resulting
in tropical forests being able to absorb less and less carbon dioxide (CO2) every year.
2. We risk destroying the planet unless we cut emissions

Therefore, our primary concern should be to develop the best response possible to the current level of emissions in order to prevent the
forecasted increases in GHG emissions levels to avoid catastrophic climate change. First, we need to ensure that we understand the
causes in order to change what we are currently doing wrong. According to the IPCC, the main culprit is our fossil fuel consumption,
which accounts for the majority of anthropogenic GHG emissions. The very natural resources that allowed us to thrive and prosper
during the Industrial Revolution, resulted in the rapid expansion and growth of our species, and continue to represent a source of
livelihood for entire industries and populations, have placed the current world ecosystem in peril. We have seen the impacts of
unparalleled growth in China, leading to heavily polluted air and waterways. This has led to efforts to inform the general populace of the
dangers of unmitigated GHG emissions and the need for countries to urgently address their carbon emissions. Without a plan and a
strategy leading to the correct legislation to dramatically reduce GHG emissions, the Earth's habitable environments may be irrevocably
altered in the near future, potentially jeopardizing the future of our own species.
3. Unmitigated climate change will cause widespread destruction

These uncontrolled rapid increases in GHG emissions could result in global climate change leading to melting snowcaps and glaciers,
rising sea levels, and changing weather patterns (including rising seawaters, floods, droughts, disappearing rivers, and altered
landscapes). Due to global warming, sea levels have risen approximately eight inches since 1880, and with an expanding global
population, more people now live by the water. Estimates by scientists predict that sea levels could rise an additional twenty to eighty
inches during the twenty-first century. Existing infra-structure along the shorelines could be significantly impacted, begging the
question: what will we do with the infra-structure? Will we want it to simply be flooded over, polluting our oceans? In the United States
and United Kingdom, there are over 3 million properties and homes that could be flooded, and most are less than four feet above high
tide. This will affect all countries with ocean shorelines and rivers that migrate to oceans. The impact of climate change will be vast,
affecting not only infrastructure (e.g., seaports, airports, highways, pipelines, etc.), but also agriculture (via droughts and floods) and
lifestyles. The impact of climate change has the potential to lead to decreasing standards of living, especially in communities and
countries with an economy heavily dependent on variations in cli-mate. This includes developing countries, as well as cities and states
that have primarily agriculture-based economies
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Carbon Tax Desirable: WarmingJustifies Action [contd]

4. Climate change is the biggest challenge we facewe must act to address it
Climate change resulting from human activity likely poses the biggest environmental risk modern society faces. Its impact could be
global, its long-term costs are likely to exceed those of any other environmental challenge, and its effects probably cannot be entirely
averted, regardless of the choices we make. To address these potential dangers, the environmental movement and the political left have
offered numerous policies and proposals, but nearly all of them have been profoundly flawed. Those flaws stem not so much from the
proposed higher taxes, diminished individual freedom, and expanded government control over the economy although the left's
proposals would make all of those mistakes. They come from an excessive faith placed in mere assumptions about what is an intractably
complex problem, and from insufficient flexibility should those assumptions prove mistaken. Although climate change could be a major
challenge, many of the most important and effective means of confronting it are likely to involve relatively modest steps, such as
limiting government activity in areas likely to prove maladaptive, increasing government efforts in a few select areas, and unleashing the
private market to solve problems. Among the specific steps toward these ends that policymakers should consider are slashing subsidies
to activities that either promote climate change or that forestall adaptation; committing to "source agnostic" public investments in a
"smart grid" that would move power around the United States, while encouraging distributed generation; enacting a swap of carbondioxide taxes for other tax cuts to stimulate the economy; and ramping up funding for scientific research in a variety of cutting-edge
fields, perhaps most notably geo-engineering.
5. There is scientific consensus that warming is real and we need to act

What We Know Today about Climate Change. The intellectual rigor of the climate change debate has all but come to an end, being
frustrated by the availability of "hard data.' The Intergovernmental Panel on Climate Change (IPCC), formed by the United Nations and
the World Meteorological Organization, is a body of hundreds of scientists from around the world contributing to the current state of
knowledge in climate science. The IPCC, along with other respected organizations and scientists, using the scientific method and
correcting for possible errors, have come to the conclusion that climate change is a legitimate issue. If these climate scientists are to be
believed, then it is imperative that we act accordingly and do something now to reverse this destructive trend.
6. Unchecked climate changes threatens an array of negative effects

Uncontrolled rapid increases in GHG emissions create significant risk of adverse impacts on the environment potentially resulting in
changes that cannot be reversed. Global climate change leads to snow caps and glaciers melting, sea levels rising, and changing weather
patterns (resulting in flooding and draughts). In the United Kingdom alone, as many as 490,000 properties are at risk of flooding due to
rising sea levels, and the risk impacts all countries with ocean shorelines. Climate change will impact infrastructure, agriculture, and
lifestyle potentially leading to de-creasing standards of living, especially in communities that have an economy sensitive to variations in
climate. This includes many of the developing countries that are primarily agriculture-based economies.
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Carbon Tax Desirable: WarmingJustifies Action [contd]

7. We need to cut emissions to keep global warming in check
Climate change, according to the United Nations Convention, is "a change of climate which [is] attributed directly or indirectly to human
activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over
comparable time periods." Climate change occurs because of the increase of greenhouse gases (GHGs) in the atmosphere, gases that
include carbon dioxide (CO[2]), ozone, nitrous oxide, halo-carbons, methane, and other industrial gases. Scientists have concluded that
in order to avoid the most damaging results from climate change and global warming, it is necessary to limit warming to two degrees
Celsius over pre-industrial revolution temperatures. Atmospheric levels of GHGs have increased almost forty percent from pre-industrial
levels of 280 to 380 parts per million (ppm) as of 2011. Over the past 650,000 years, atmospheric levels of GHGs have remained within
the range of 180 ppm to 300 ppm. This sustained increase is attributed to increasing man-made emissions. From 1970 to 2004, GHG
emissions increased by seventy percent. Present levels of emissions are not sustainable. The Potsdam Institute determined that the
environment can manage up to 350 ppm, a level that has already been exceeded. Even if emissions levels were to be reduced to the
2000-year levels and remain constant, the earth would still have a warming trend of 0.1 degree Celsius every ten years due to the slow
feedback of the oceans. Real reductions are needed, simply keeping emissions at current levels (387-400 ppm) would result in the globe
warming by at least 2.8 degrees from the time of the industrial revolution until the end of the millennials' lifetimes. Therefore, the
primary concern is how to best respond to the current level of emissions and prevent the forecasted increase in emissions levels.
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Carbon Tax Desirable: WarmingReal

1. Warming is realthe temperature record proves
Hardly anyone who has taken a serious look at climate change can dispute two fundamental facts: The earth has warmed, and human
activity particularly the burning of fossil fuels has had a significant impact on this warming. First, the earth has grown steadily
warmer since the Industrial Revolution, and the pace of warming has increased in the past 40 years. Twenty of the warmest years on
record have taken place since 1989. Overall, the United Nations Intergovernmental Panel on Climate Change (IPCC) says that warming
has been on the order of 1.3 degrees Fahrenheit since 1800. Early estimates and data sets used to document warming were fraught with
errors and ambiguities, but more recent analysis of the data (for instance, by the Berkeley Earth group) leaves no room for ambiguity:
Warming is real and has continued. That said, predicting the future rate of warming on the basis of models has proven difficult.
Although the actual levels of greenhouse gases known to cause warming are higher than many scientists once believed they would be at
this point, the actual changes in temperature have tended toward the low end of most models. For reasons that scientists still do not fully
understand probably related to oceans retaining heat the rate of warming has slowed quite a bit in the last 18 years. It is not true,
however, that global warming has "paused." The overall temperature trend, by any reasonable evaluation of the data, is still headed
upward. Estimates produced by the IPCC in April 2014 indicate that temperatures will rise an additional 5.1 to 7.1 degrees Fahrenheit
before the end of the 21st century. Given that past climate estimates have been off in a variety of ways, estimates for future increases
may also prove inaccurate. But a warmer earth is a near certainty.
2. Warming is realmultiple indicators prove

Climatologists can study the composition of ice at the polar regions to get a baseline record of temperatures throughout time. The
scientists are able to gather this data using correlation methods to show climate change through-out time. Climate scientists also use data
collected at weather stations set up at various points throughout the world and use computer simulations to compare the data with future
projections. With those data sets in hand, climatologists and other scientists are able to compare temperature changes, and after
correcting for natural variability in weather patterns, climatologists are now saying global warming is occurring.
3. Slowing of warming proves nothingother factors explain it, and global warming is still real
Objection - There Are Unexplained Patterns of Cooling. The IPCC, in its newest report, actually addresses this issue. The observed
reduction in surface warming trend over the period 1998 to 2012 as compared to the period 1951 to 2012, is due in roughly equal
measure to a reduced trend in radiative forcing and a cooling contribution from natural internal variability, which includes a possible
redistribution of heat within the ocean (medium confidence). The reduced trend in radiative forcing is primarily due to volcanic
eruptions and the timing of the downward phase of the 11-year solar cycle. So, here the IPCC is demonstrating that it is taking into
account factors other than GHG emissions in particular cooling cycles, i.e. natural variability.
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Carbon Tax Desirable: WarmingAnswers to Leakage

1. Leakage would not significantly undermine the effects of domestic emissions cuts
Because the U.S. emits significantly more CO2 than most other countries, reducing U.S. emissions can contribute to reducing total
global emissions. However, imposing a carbon tax or other policy to reduce emissions in one country can lead to increased emissions
elsewherea phenomenon known as carbon leakage. This occurs for a variety of reasons. First, production of some carbon-intensive
goods is likely to move abroad to avoid the tax. Second, reduced U.S. demand for fossil fuels would result in lower global prices for
those fuels, making them more attractive in unregulated countries. Research finds that, on average, a 10 percent reduction in carbon
emissions in the United States would be partially offset by a 1 to 3 percent increase elsewhere. (See questions #4 and #5 for measures
that could reduce carbon leakage.)
2. Unilateral action is justified even in the face of carbon leakage

In Spite of the Leakage Problem it is Important that Countries Still Act to Reduce Carbon Emissions. According to one author, "while it
is still possible that the developing nations could undo reduction efforts, for developed nations doing something still seems preferable to
doing nothing." It is true that developed countries who choose to participate in a global attempt to reduce carbon emissions could be
falling behind other countries economically who don't impose those same restrictions on their own country, but it may still be preferable
to act in light of: higher potential future costs from having to respond later, uncertain economic consequences (i.e. a country imposing
those restrictions may develop better technology when it is "necessary' to stay competitive), and developed countries probably should
lead the way in environmental response due to those countries creating the issue in the first place. There could also be a potential
security threat to countries capitalizing on the low cost of carbon-intensive re-sources to try to secure their own wealth. Regardless of
which country decides to reduce carbon emissions first by acting now to stop or reverse the coming effects of climate change, eventually
every country must participate.
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Carbon Tax Desirable: Answers to Alternatives (General)

1. We should impose a carbon taxit is superior to the alternatives
To address the challenge of global warming more effectively, and to improve its tax base, the United States should impose a revenueneutral carbon tax on all domestic production and importation of coal, petroleum, and natural gas. The United States should seek to
persuade other nations that carbon taxation is a critical tool in confronting the dangers of global warming. This Article first argues that a
carbon tax is a necessary and politically feasible tool to resist the rise in global temperatures attributable to increased carbon dioxide
("CO2") that human activities have injected into the atmosphere. The Article then explores how a carbon tax might be designed and
implemented. This carbon tax would have two major purposes. First, imposing a tax on carbon production would create an incentive to
reduce carbon dioxide emissions. This reduction is desirable because carbon dioxide emissions appear to be contributing significantly to
global warming and climate change, developments that may cause serious environmental damage. The carbon tax may be a better tool
for carbon reduction than alternatives such as subsidies, regulation, or cap-and-trade. However, the solution for reducing carbon
emissions may include all four of these and other approaches, as a matter of both practical politics and administrative feasibility. The
second major purpose of taxing carbon would be to create a more efficient and equitable means of raising revenue than taxing income,
consumption, or other typical bases for taxation. Because of this efficiency and fairness, it is less important to determine precisely how
much and how fast the emission of CO2 is changing the world's climate, or to determine the possible consequences of those changes on
humans and other inhabitants of the planet.
2. Carbon taxes are better than the alternativesrequire less interference with market mechanisms
Establishing a Carbon Tax - How the Price Affects Goods Automatically. With a carbon tax, the price of goods fluctuates with the
market and carbon taxation follows the market; that is, if more of a certain carbon-intensive good is being used, then more carbon taxes
are collected. Carbon taxation doesn't require spending on market studies to determine the appropriate "cap" the way a cap-and-trade
system does; carbon taxation needs no such model. A carbon taxation system is superior to other systems because it creates less
interference overall with the market. "Government policy can and should correct market failures, but should do so by sending simple
price signals, not by trying to simulate an efficient economy through governmental policy and expenditures."
3. Carbon taxes are more efficient than the alternatives

The Government should allow the private market to make market decisions as much as possible while identifying sources of market
failure and determining how to correct those market failures in the least disruptive manner possible. Carbon taxation does this better than
any of the previously described methods. The Government should not make decisions about particular carbon-reducing technologies,
because "it is important that climate policy remain "technology-neutral' - that it not push vast economies and governments toward any
particular technology, no matter how attractive." When the Government sets the incentives through a Pigouvian tax system, the polluters
generally respond to those incentives by reducing their emissions. Using the optimal solution may differ depending upon the industry.
For instance, "[a] polluter could find a way of running low-NO<x> burners more efficiently that costs more, but that improves emissions
rate and reduces pollution. If the pollution savings offset the extra cost, the polluter would pursue it under a Pigouvian tax system ... ."
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Carbon Tax Desirable: Answers to Alternatives (General) [contd]

4. Pay to Pollute objections ignore the act that carbon taxes are superior to the alternatives
One argument against allowing a price to be set for carbon emissions is that this essentially allows polluters to pay to pollute. If polluters
can make an economic calculation in their decisions to pollute the environment, then the environment will become that much more
polluted provided the polluter has the ability to pay the cost. The degradation of the environment will occur regardless of the economics
or the reasons behind the pollution. 3 Markets are not necessarily static, and sometimes polluters can still make a profit beyond a
theoretically set price point (at least for a little while) simply because the polluter has found a way to develop a particular carbonintensive product much more cheaply than their competitors. Environmental degradation occurs while the competitors and the market are
still lagging behind what the competitive price of the good should be. As a response, it is important to note that this objection is really an
objection against all price-based systems, including cap-and-trade. The alternatives, such as government subsidies, command-andcontrol, and the alternative of doing nothing seem worse. At least if a "price signal" is sent to the polluter, then something is being done
to reduce carbon emissions. The claim is not that carbon taxation has no flaws, but that carbon taxation is simply a better system for
controlling carbon emissions than any other.
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Carbon Tax Desirable: Answers to AlternativesCap-and-Trade (Comparative)

1. Carbon tax is superior for poor peoplehurt by higher energy prices under cap-and-trade, can receive monies
from carbon tax
Margo Thorning, PhD, Senior Vice President and Chief Economist, American Council for Capital Formation, Testimony before Senate
--Cap and trade system: impact on consumers and workers Regardless of how the allowances were distributed (unless they were all
auctioned and the proceeds rebated to low income households), most of the cost of meeting a cap on CO2 emissions would be borne by
consumers, who would face persistently higher prices for products such as electricity and gasoline. Those price increases would be
regressive in that poorer households would bear a larger burden relative to their income than wealthier households would. In addition,
workers and investors in parts of the energy sector such as the coal industry and in various energy- intensive industries would be likely
to experience losses as the economy adjusted to the emission cap and production of those industries' goods declined. (Congressional
Budget Office, Economic and Budget Issue Brief, April 25, 2007.) In contrast, carbon tax revenues could be rebated to low income
individuals to offset the impact of higher energy prices caused by the tax on fossil fuels.
2. Carbon taxes are better than cap-and-tradecost certainty

It is clear that both carbon taxation and cap-and-trade systems are market-oriented schemes constructed to reduce carbon emissions.
However, there is a heated debate concerning the superiority of the two approaches, and perhaps the largest area of discrepancy between
the two is the "benefit certainty" versus "cost certainty" standard. In a cap-and-trade system, the cap - i.e., the maximum amount of
allowable emissions - provides the environmental benefit from the emissions reduction and is referred to as the "benefit certainty."
However, just because it is labeled "benefit certainty" does not mean any benefit will actually occur, as illustrated by the case of the EU,
and this is the biggest flaw of cap-and-trade. Additionally, all cap-and-trade programs have reversion mechanisms to a carbon tax if the
price of carbon gets out of hand. For example, a country would never shut down its power sector simply be-cause emissions permits for
the year were all used by November. The carbon-tax system, on the other hand, relies on a predetermined carbon-emissions price, set in
advance, al-lowing emitters to plan future power plant upgrades to reduce emissions and improve efficiencies. It also allows consumers
to plan their purchases. With this set pricing strategy, a carbon tax establishes cost certainty. Cap-and-trade programs cannot match this
cost certainty because there will be fluctuations in the market over time and the cost will be adjusted accordingly. In practice, this
stability in price that coincides with a carbon tax could prove to be as much as five times more cost effective than a cap-and-trade
program. It is also important to note the benefit certainty of the cap-and-trade scheme can be nullified if the cap is set at an inappropriate
level and if there is no incentive for emitters to comply with the regulations. This is precisely what occurred in the initial phases of the
EU ETS. Over allocation of allowances undermined the benefit certainty and negated the incentive for emitters to comply with the
regulation, leading to a disappointing emissions reduction. Thus, the certainty of the benefit is somewhat of a misnomer because the
benefit is not concrete. Although carbon taxation does not have benefit certainty, an issue ad-dressed by the CTR, it does have a very
clear cost certainty. The debate between which certainty is better becomes tilted heavily in favor of cost certainty when political
intervention and unsustainable caps are added to the equation. In this regard, carbon taxation is favored over cap-and-trade.
3. Carbon taxes are superiorallows flexibility in timing of reductions

--Cap and trade system and flexibility in timing of reductions Many experts conclude that it makes economic sense to allow nationwide
emissions to vary on a year-to-year basis because prevailing economic conditions affect the costs of emissions abatement. This
flexibility occurs under a CO2 tax because firms can choose to abate less and pay more tax in periods when abatement costs are
unusually high, and vice versa in periods when abatement costs are low. Traditional permit systems do not provide similar flexibility
because the cap on economy wide emissions has to be met, whatever the prevailing abatement cost.
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4. Carbon tax more likely to spur innovationhigher certainty of tech payoff encourages investment
--Impact of a cap and trade system on innovation Caps on emissions are not likely to promote new technology development because caps
will force industry to divert resources to near-term, "end of pipe" solutions rather than promote spending for long-term technology
innovations that will enable us to reduce GHGs and increase energy efficiency. An emission trading system will send exactly the wrong
signals to investors because it will create uncertainty about the return on new investment. A "safety-valve" price of carbon (designed to
create a sense of confidence about future energy costs) can easily be changed. Such uncertainty means that the hurdle rate, which new
investments must meet, will be higher (thus less investment will occur) and they will be less willing to invest in the U.S. A tax on carbon
would provide more certainty for investors and allow them to replace old capital equipment with less carbon intensive equipment during
the replacement cycle.
5. Carbon taxes are superioravoid grandfathering problems

A carbon tax, however, is likely to achieve economies of scale in many jurisdictions. These economies are achieved by piggybacking off
existing bureaucratic infrastructure. A carbon tax can be easily designed to be administratively similar to existing forms of taxation in a
jurisdiction, most notably a VAT, which is discussed in more detail in the following section. Experience in various jurisdictions has
demonstrated that existing bureaucracy can administer new forms of taxation quite easily if designed properly. For example, the VAT in
the United Kingdom is administered by the customs department, whereas the VAT in Australia is administered by the central taxing
authority, which also handles other federal level taxes (such as income tax). The latter example demonstrates that the prior existence of a
VAT is not necessary for the relevant bureaucracy to be in place for the administration of a carbon tax. The absence of a VAT in
jurisdictions such as the United States does not therefore form the basis for an objection to adopting a carbon tax on efficiency grounds;
the infrastructure is still in place notwithstanding the absence of a VAT. This should be compared to an ETS, which is likely to need
entirely new departments to oversee, because it requires an auction process (or an allocation process) and a secondary market for trading
the permits. A significant advantage of a carbon tax over an ETS, though, is the avoidance of the perverse incentives generated through
grandfathering permits. Because--short of declaring a complete or partial exemption for specific actors based on prior emissions--there is
no scope under a carbon tax for adjusting burdens based on activity levels prior to the introduction of the tax, there is no incentive for
polluters to increase their level of pollution leading up to the introduction of the carbon tax.
6. Carbon tax superiorcap-and-trade risks price volatility that will tank the economy
In a recent paper, Ian Perry of Resources for the Future notes that as a result of the success of the U.S. sulfur dioxide trading program
and the start up of the European Union's Emission Trading System, many in Congress have expressed support for a cap and trade system
in the U.S. Perry cautions, however, that other options, such as tax on carbon emissions, may be a superior instrument if a mandatory
federal carbon emission program were to be established (Weathervane, March 23, 2007). --Cap and trade system and carbon price
volatility Price volatility for a permit to emit CO2 can arise under a cap and trade program because the supply of permits is fixed by the
government, but the demand for permits may vary considerably year to year with changes in fuel prices and the demand for energy. As
mentioned above, price volatility for energy has negative impacts on economic growth. In contrast, a CO2 tax fixes the price of CO2,
allowing the amount of emissions to vary with prevailing economic conditions. For example, in the EU the price of a permit to emit a ton
of carbon has varied by 17.5 percent per month over the first 22 months' operation of the ETS. As a new study by Dr. Michael Canes,
senior research fellow at LMI, points out, volatility in fossil energy prices have strong adverse impacts on U.S. economic growth. Even a
reduction in the rate of growth from such a shock of as little as 0.1 percent per year implies costs of over $13 billion per year. (Why a
Cap & Trade is the Wrong Policy to Curb Greenhouse Gases for the United States, The Marshall Institute, July, 2007). In addition,
studies have shown that a cap and trade program that gives away (rather than auctioning the permits) can be highly inequitable; the
reason is that firms receiving allowances reap windfall profits, which ultimately accrue to individual stockholders, who are concentrated
in relatively high- income group.
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7. Carbon taxes are better than cap-and-trademuch easier and quicker to implement
2008, p. 68-69.
A carbon tax can be implemented much more quickly than a cap-and-trade program. This factor is critical to the effectiveness of any
CO[2] emissions reduction policy because time is of the essence from a scientific performance basis. So far, cap-and-trade has proven to
be unsuccessful in reducing carbon emissions in the European Union and other global markets. Although a cap-and-trade system has
been extremely successful in the United States for reducing SO[2] emissions in the past decade, the SO[2] model is not dispositive for
carbon. A carbon cap-and-trade program will have to be designed one hundred times larger in scale than its SO[2] counterpart, which
creates an enormous problem of scale, complexity, administration, and cost of compliance for cross-border purposes. In a comparable
example, the success of the U.S. acid rain program required solid data collection and transparent verification combined with the use of
continuous emissions monitoring technology. Readily available technology does not currently exist for filtering or capturing CO[2].
Carbon storage or sequestration will likely take another decade to become cost effective and will create operational de-rating of ten to
thirty percent, water supply demands, fuels shifting, and higher operating costs to succeed. Cap-and-trade systems are also complex and
difficult to design. Issues concerning the proper level of the cap, timing, allowance allocations, pre-emption, certification procedures,
standards for use of offsets, penalties and regional conflicts must all be addressed before the system can be implemented. These issues
require complex operational and political considerations that surely would hinder any timely solution to regulating U.S. CO[2]
emissions. Further, while this design and implementation process is taking place, polluters are free to continue unchecked while
uncertainty reigns for another decade. A cap-and-trade approach for CO[2] will not be as effective as a carbon tax in the short term
because it will lag behind the needs of the marketplace, scientific inquiry, and global policy making. It would not offer transparency, nor
a clear stable price signal to support capital investment and new investment decision-making until 2020.
8. Carbon taxes are better than trading schemesmore transparent

2008, p. 69.
The protracted negotiations necessary to develop a comprehensive and politically acceptable carbon cap-and-trade program leave the
process vulnerable to parties shaping the program to maximize narrow economic benefits, maximizing their market positions in industry
sectors, or constraining competition rather than designing an economically efficient system that maximizes public gain and a competitive
U.S. economy. In a cap-and-trade pro-gram, although market prices will increase, just as with a carbon tax, the reasons for the increase
are hidden in a maze of new bureaucracy, regulatory impositions, and cost partnerships that render it more opaque and politically
attractive. A carbon tax can be implemented with far less opportunity for manipulation. Carbon taxes are transparent and easily
understandable by the public. Once the market targets for carbon are set, they can be readily adjusted according to market success or
failure. However, it is this transparency and flexibility that makes a carbon tax politically undesirable because it is clear where and how
society will have to take responsibility, make direct changes and improvements, and pay for the CO[2] by-products of society.
9. Carbon taxes are simply better at addressing warming than are cap-and-trade schemes
Two distinct proposals have been made to reduce GHG emissions: a carbon tax and cap-and-trade. Cap-and-trade has focused on
limiting emissions with the expectations that technology can actually do so without resulting in prices for carbon being so high that
either economic growth is impacted or emissions are not reduced. The carbon tax proposals on the other hand claim that a tax on carbon
would reduce demand for carbon intensive items thereby reducing total emissions while refunding the tax to consumers. Neither of these
proposals specifically addresses carbon emissions nor show how emissions are actually reduced. This paper introduces carbon tax with
reinvestment, whereby all taxes raised by the carbon tax are reinvested into specific low-to-no carbon energy sources that result in a
systematic reduction in total carbon emissions. The results are stunning and are shown in the models, resulting in a significant extended
reduction in carbon emissions. More importantly, the proactive nature of the tax structure results in significant new construction, job
creation, and eventually a reduction in total tax due to the rapidly declining emissions. The tax is structured so that there is no incentive
to invest in production in non-compliant regions, resulting in a world-wide abatement effort for GHG emissions.
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10. Carbon taxes are superior to cap-and-trade approachescertainty
The global climate change problem continues to apply pressure for the enactment of climate change legislation. In the following
paragraphs, I will further expand on why a carbon tax trumps cap-and-trade in the following categories: (1) benefit certainty and cost
certainty, (2) length of legislation, (3) implementation, (4) enforcement, (5) revenue and re-investment, (6) coordination with existing
laws, and (7) environmental effectiveness. This tax should be implemented as soon as possible in the form of a carbon tax with
reinvestment. A. Benefit Certainty and Cost Certainty. Cap-and-trade and carbon tax are both market-based mechanisms designed to
reduce GHG emissions, but it is an ongoing debate as to which of these two mechanisms will prevail in climate change legislation. There
are many differences between cap-and-trade and carbon tax, but at the heart of the issue is one fundamental difference: benefit certainty
versus cost certainty. A cap-and-trade system places a cap on the level of emissions permitted. This cap states that its implementation
will provide environmental benefits from the achieved emission reductions. This is referred to as "benefit certainty." A carbon tax sets
up an exact price on carbon emissions. This amount is set in advance so that emitters are always aware of the price of emissions. Thus,
the carbon tax provides "cost certainty." Cap-and-trade does not give cost certainty, as the market may fluctuate over time. In theory, the
price stability of a carbon tax could prove as much as five times more cost-efficient than cap-and-trade. Additionally, the "benefit
certainty" of the caps is an unconvincing advantage if emissions are not actually capped at a sustainable level and if the regulations
provide no incentive for over compliance, even when emission prices are very low. Carbon taxes, on the other hand, provide no "benefit
certainty," though there is no question that they are able to maintain "cost certainty." The argument over which "certainty" is more
important becomes irrelevant when cap-and-trade becomes plagued by political intervention and safety valves and is unable to provide
the "benefit certainty" of a fixed cap.
11. Carbon taxes are better than cap-and-trade systemseasier to implement

Aside from the write-up, cap-and-trade is extremely complicated to enact. The cap must be imposed "upstream," which means that the
majority of the population is only affected indirectly because the tax is applied on the producer rather than on the final product. Also,
while the upstream approach reduces the complexity brought by a large number of sources, the system remains complex. First, the capand-trade system requires baselines to be set for the establishment of a cap. Next, regulators must decide how allowances will be created
and distributed. The options for this distribution include free dispersal or auctioned allowances. Free allowance distribution requires
regulators to decide which industries receive allowances, but an auction requires complex monitoring to prevent fraud. Third, further
monitoring must be set up for the trading of allowances. Control must be stringent so that the same allowance cannot be used more than
once. Enforcement policies must be implemented to penalize those that exceed their allowances. Further, one must implement a
transnational enforcement regime if allowances are traded internationally. Finally, pro-visions are typically set for the banking and
borrowing of allowances. Some of these provisions also allow for a safety valve to prevent extreme cost uncertainty. If offsets are to be
allowed for carbon sequestration and storage, or similar projects, this must also be included in a provision. The many requirements of a
cap-and-trade system create extreme complexities that take time to work out. The more complex the program becomes, the more
difficult it will be for the proposal to pass into law. In all aspects, a cap-and-trade system is much more complicated than a carbon tax. A
successful cap-and-trade program requires intense monitoring and reporting mechanisms. Unfortunately, our current monitoring
technologies are not sufficient to take on the task of such an expansive pollutant as carbon.
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12. Cap-and-trade is difficult to enforcecarbon taxes face far fewer barriers
Stephen Sewalk, Assistant Professor, Daniels College of Business, University of Denver, Carbon Tax with Reinvestment Trumps Capand-Trade, PACE ENVIRONMENTAL LAW REVIEW v. 30, Spring 2013, p. 606.
Adding to the extensive list of the complexities surrounding cap-and-trade is the extreme difficulty of enforcement. A carbon tax
identifies every person as a polluter, whereas a cap-and-trade only identifies select industries as polluters. Under cap-and-trade,
monitoring creates many unseen costs and difficulties. Administrative costs are often over-looked, but remain crucial when looking at
the costs of emission-reducing actions. The costs of establishing the cap-and-trade program include, but are not limited to, educating the
targeted industries, monitoring emissions and compliance, and enforcing the policy. To reduce costs as much as possible, regulators must
strive for minimal administrative efforts. This usually means that approaches that require monitoring fewer parties and use more readily
available information are the most favored. This leads to a tradeoff between the extent of a program's coverage of emission sources and
the administrative costs in order to achieve administratively simpler programs. New costs will continue to appear in the creation of a
nation-wide cap-and-trade program, but an additional concern lies in our monitoring technologies. In cap-and-trade, an elaborate system
would need to be created to distribute and collect allowances to prevent cheating. This is an extremely difficult and complicated task.
Effective measures to penalize those that emit without allowances may be even more difficult. Cap-and-trade will require the creation of
a completely new governmental body to take on these administrative and monitoring activities. The carbon tax, on the other hand, can be
enforced by the IRS and the EPA with their existing staff and extensive experience dealing with excise taxes and clean energy,
respectively.
13. Carbon taxes are superiorgenerate revenues that are under public control
ARIZONA JOURNAL OF INTERNATIONAL AND COMPARATIVE LAW v. 29, Spring 2012, p. 62-63.
A further advantage of a carbon tax is that all funds generated through its operation flow into the public purse. This provides a revenue
source from which the government may finance other environmental policy objectives. Alter-natively, the revenue may finance
programs to alleviate the adverse effects of the tax, such as training programs for workers unemployed as a result of the shifted industry
cost structure or reducing or replacing less efficient taxes. It should be strongly noted, however, that a carbon tax should not be used as a
means of raising revenue; the objective is to enhance economic efficiency through internalizing costs of pollution. Attempts to use a
carbon tax specifically as a source of revenue are likely to create economic distortions; setting too high a rate will lead to less than
optimal emissions, thereby undermining the legitimacy of such a tax.
14. Carbon tax is much less likely to run afoul of WTO rules
Dr. Anne Smith, Vice President, CRA International, Testimony before Senate Committee on Environment and Public Works, CQ
CONGRESSIONAL TESTIMONY, 11807, lexis.
The method of S.2191 in Title VI for obtaining WTO-compliant leakage protection was crafted to work with a cap-and-trade form of
proposal. Interestingly, the prospects of successfully and immediately implementing border tax adjustments are considered to be much
greater in the case of a greenhouse gas tax than in the case of cap-and-trade. If a carbon tax would provide better prospects for an
immediate and WTO-compliant border tax adjustment, perhaps we should consider applying this type of approach for industries exposed
to leakage through international competition, so that they at least can have the protection from leakage, even while other less vulnerable
sectors could be in a cap-and-trade scheme if they choose. This might be especially useful to consider for certain commodities for which
a heavy reliance on imported supply might be a strategic concern for the US. Those having a hand in creating a climate policy for the US
should become much more familiar with the intricacies of WTO rules, and the likelihood of successfully creating immediate and durable
protection from leakage under different types of greenhouse gas policy designs. This needs to be sorted out before and not after a
greenhouse gas policy is enacted.
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15. Case studies prove that carbon taxes and superior to cap-and-trade schemes
Eric Merkley, Ben Eisen, Assistant Research Director and Senior Policy Analyst, Frontier Centre and Kenneth P. Green, Resident
Scholar, American Enterprise Institute, The Economic, Environmental and Political Consequences of Carbon Pricing: Case Studies in
Pricing-Based Carbon Controls, POLICY SERIES n. 131, Frontier Centre for Public Policy, 212, p. 32.
We drew several broad conclusions from these case studies. First, the case studies suggest that carbon taxes are preferable to cap and
trade from both an environmental and economic perspective. It is extremely difficult for any central planner to establish regulations for
an artificial market that are fair to businesses and consumers alike. The political nature of the process allows emissions trading to
become a hotbed of rent-seeking, with interested parties seeking favourable regulations, loose offset criteria or free permits that allow
them to avoid compliance costs or even reap profits. Of course, businesses and industries that cannot navigate through the politics are
punished disproportionately. Even setting aside the weaknesses in a politically constructed market, it is difficult to anticipate future
emissions and to establish proper caps given the fluid nature of the global economy.
16. European experience proves that carbon taxes are better than cap-and-trade policies
The failure of cap and trade can clearly be seen in the implementation of the EU-ETS and the RGGI. In both cases, an inability to predict
emissions led governments to over-allocate permits, causing a collapse of carbon prices. The EU-ETS scheme simply handed out permits
in the initial stage instead of auctioning them, and this resulted in windfall profits for participating firms. In phase one of the EU-ETS,
the collapse in the price of emissions was attributable to a lack of co-ordination of member states and simple failures of foresight. With
RGGI and phase two of the EU-ETS, the collapse in the price of emissions was due to the inability to adapt to the reality of emissions
reductions that occurred because of the global economic downturn. On balance, history has shown that it is difficult to establish an
effective cap and trade policy. Carbon taxes, on the other hand, are somewhat easier to implement effectively.
17. Carbon taxes are far simpler to implement than is a trading scheme
Wilson Dizard, journalist, Carbon Trading Fails to Reduce Emissions, Harms Climate, Study Says, AL JAZEERA AMERICA, 8
2515, http://america.aljazeera.com/articles/2015/8/25/european-climate-credits-fail.html, accessed 1-8-16.
For some companies, buying the right to pollute with offsets is often cheaper than refurbishing their own polluting facilities like coalfired power plants or chemical plants that can emit greenhouse gasses more dangerous than carbon dioxide. To Lukas Ross, a climate
advocate at Friends of the Earth, the cap-and-trade system was doomed to fail from the start. He said it could even lead to environmental
injustices. This is another nail in the coffin for Wall Streets solution to the climate crisis, Ross said. He prefers a direct tax on carbon
emissions. A carbon tax is much more simple to implement, Ross added. It effectively prices in the cost that climate disruption is
going to inflict on present and future generations and incentivizes the consumption of clean renewables. An overwhelming majority of
scientists agree that manmade greenhouse gas emissions are elevating average global temperatures and disrupting weather in dangerous
and costly ways from severe droughts and prolonged fire seasons to stronger storms and raging floods.
18. Cap-and-trade is inferior to carbon taxesdiscourages innovation

Cap-and-trade programs are more similar to carbon taxation programs than government subsidies or command-and-control programs are.
All programs are essentially intending (or should be intending) to force the polluter to internalize the externalities caused by carbon
emissions. If the polluter is forced to pay a cost equal to the damage caused by each unit of carbon released, then the polluter will likely
respond by reducing the carbon emissions. Cap-and-trade programs are an attempt to force the polluter to pay for these emissions. Capand-trade programs, however, have the very bad side effect of actually discouraging innovation. This is true because the allowances
distributed through cap-and-trade programs are actually assets that can be retained by the companies (polluters). Any company having
these allowances therefore would likely not want to pursue innovation, because pursuing innovation would mean decreasing the value of
the assets owned by the company if the innovation were successful. Cap-and-trade is likely not the best or most effective solution for
reducing carbon emissions.
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1. Carbon trading failsproven by a recent study of the EU program
Wilson Dizard, journalist, Carbon Trading Fails to Reduce Emissions, Harms Climate, Study Says, AL JAZEERA AMERICA, 8
2515, http://america.aljazeera.com/articles/2015/8/25/european-climate-credits-fail.html, accessed 1-8-16.
A United Nations-backed carbon-trading scheme in Europe, originally meant to combat global warming, has instead resulted in the
release of more than half a billion additional tons of greenhouse gases, according to a new report. The Stockholm Environment Institute
(SEI) report released Monday found significant problems with the efficacy of carbon offsets. The researchers found issues with 75
percent of 872 million offsets, and point to a lack of oversight as the main problem. We know what rules are needed and then we need
the political will to implement them, Anja Kollmuss, one of the authors of the study, told Al Jazeera. And so far this has been
lacking. The Joint Implementation (JI) carbon-trading scheme, established under the Kyoto Protocol, may have seriously undermined
global climate action, researchers said. Faults in JI have released 600 million tons of carbon dioxide more than if the scheme wasnt in
place, the report said. "This study focuses on that part of JI that is not subject to international oversight, but is instead left up to the
individual countries to administer and ensure integrity," Julia Justo Soto, head of the UN's Joint Implementation Supervisory Committee,
said in a release Tuesday. Soto recommended that the enforcement "mechanism in future be run under a single track with international
oversight." Carbon-trading markets let companies in certain industrialized countries earn the right to emit greenhouse gasses by funding
offsets elsewhere, like cleaning up combustible piles of abandoned coal mine waste. In theory, this will keep the total emissions under
goals set by the European Union, but the plan only works if the offsets make a legitimate reduction in emissions. The SEI study found
many do not.
2. Trading is of limited effectivenesspermit allocation issues

The attractiveness of ETSs is shown by its adoption in a number of jurisdictions, most notably the European Un-ion. Past experience,
however, has shown that ETSs may encounter significant practical problems. The first of these is permit allocation. Traditionally,
permits tended to be grandfathered, meaning permits were distributed to existing emitters at no cost in proportion to their current level of
emissions. This creates two forms of economic problems. First, this creates a barrier to entry in industries that emit large amounts of
carbon. This entrenches current producers in these industries, with the usual concomitant losses arising from the lack of competition
(both actual and potential, depending on the industry). Even if new entrants are able to enter the industry, incumbents hold a continuing
competitive advantage in the form of lower costs due to costless permits.
3. The implementation of a cap-and-trade scheme will failmany reasons

A cap-and-trade scheme does not actually guarantee a reduction in real GHG emissions, only in perceived or stated emissions, which
contradicts the primary goal of enacting such a scheme. To determine caps, this type of scheme requires certainty about the demand for
emissions, and therefore, requires precise regulation. To make the program effective, all emissions allowances need to be auctioned off;
otherwise, it is strife with subsidies to polluters. If there is uncertainty in emissions demand, then a cap-and-trade program becomes
unstable and unworkable. Political interference can also threaten the viability of a cap-and-trade program. Moreover, implementing a
cap-and-trade program is a complex undertaking. These programs depend on low-carbon-emission technologies being identified,
developed, and adopted to make the costs manageable in emissions reductions. Theoretically, the goal is for the markets to respond to
the price, signaling that these technologies need to be developed in order to curb emissions. Therefore, the current and future prices
provide an incentive for the development and use of these low-carbon technologies. Importantly, costs must be kept low if cap reduction
is to occur. But, what if the costs do not remain low or what if technologies take time to be developed? This uncertainty requires a
sophisticated structure that assures additional government funding for research, as well as incentives for private re-search and
development, including energy subsidization. These concerns result in legislation allowing for multi-year compliance periods, banking
and borrowing provisions, cost-containment mechanisms to avoid excessive pricing, and the availability of offsets for carbon capture
and sequestration, which may or may not actually produce any benefits. Cap-and-trade can deliver an incorrect, unclear, or disconnected
message regarding reducing emissions when the actual goal of the program should be primarily to reduce GHG emissions. Cap-andtrade seemingly allows polluters to purchase the right to pollute or to be given free permits to pollute, which could be interpreted as the
government encouraging polluters to continue emitting. Is the concept of a "right to pollute" congruent with society's interests in
reducing GHG emissions? At least with a carbon tax - through its use of the word "tax" - it informs the public and polluters what
happens to emitters (i.e., they pay).
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4. Trading implementation may actually increase emissionsmultiple reasons
Second, and related to the first, such a system creates perverse incentives. Introducing a scheme in which permits are grandfathered may
have the opposite effect leading up to the scheme's introduction. Schemes of such wide-ranging effect can be introduced (in
nonauthoritarian jurisdictions, at least) only with a period of notice; that is, the government's intention to introduce an ETS will be
signalled a significant period prior to the scheme's implementation. This provides an opportunity for current emitters to increase their
current emissions to maximize their allocation of permits. Further, this period of higher (suboptimal) pollution may be elongated due to
the inevitable political hurdles that introducing such a scheme will need to overcome (such as passage through the legislature). Howard
F. Chang demonstrates how such perverse incentives also arise when a multilateral ETS is introduced. Related to this is the potential for
rent-seeking behavior on the part of emitters, as affected industries may lobby for additional assistance. For example, subsequent to
consultation with stakeholders, under the ETS in Australia, affected industries can qualify for up to 94.5% of their permit requirements
in free assistance. This form of assistance com-pounds the perverse incentives for entities that qualify for assistance, as there are two
categories of assistance, based (in part) on the level of intensity of emissions. In other words, entities face an incentive to increase their
emissions leading up to the measurement time, because doing so may increase their level of assistance. To an extent, the problems
involved with grandfathering may be resolved by auctioning permits. While this is likely to lead to considerable political resistance from
existing emitters (hence the reason grandfathering appears to lean toward being the rule rather than the exception for permit allocations),
this approach is necessary to resolve the economic problems identified. Auctions have the added advantage of generating revenue for the
government, which may be used to alleviate some of the costs associated with the introduction of the ETS. For example, the revenue
may be used to fund training programs for workers unemployed as a result of the increased costs to industry. Alternatively, the revenue
may be used to support research into emissions-reducing technology (furthering any pollution-reducing goal the government may have)
or reducing tax burdens in other sectors of the economy. This creates its own set of problems, though. First, the government needs to
administer the auction such that the permits represent the approximate cost of pollution. Issuing too many permits is likely to result in
the collapse of the market as permits, due to oversupply, trade for next to nothing. The incentives the ETS are intended to generate will
be lost under such a scenario, be-cause a zero price, by definition, means polluters are able to pollute for free--a reversion to the pre-ETS
situation.
5. Cap-and-trade is dangerousrisks significant market volatility

The biggest challenges of cap-and-trade are determining the baseline amount of emissions and reduction targets, how to allocate
allowances, and how to use offsets. These issues combined with the rules surrounding them often slow down the development of a capand-trade scheme, leading to lengthy implementation periods. While the level of emissions is viewed as certain, it is difficult to forecast
a price to achieve the promised emissions-reduction levels defined by the cap. Because of the need to balance many factors, carbon
markets experience unforeseen volatile price shifts, raising the need to constantly monitor the cap-and-trade scheme and question actual
emissions levels. Should the price of carbon soar, there is pressure to relax or modify the cap to reduce the price. However, if the cap is
relaxed too much, the price drops and the market disintegrates.
6. Cap-and-trade systems face multiple implementation problems

A cap-and-trade system gives the benefit of increasing the limits on carbon dioxide emissions, allowing for flexibility in the market. This
flexibility allows for an ease of transition for affected facilities. This appeal of the cap-and-trade system obscures the fact that a cap-andtrade system is not the best option to combat climate change. First of all, even if Congress were to pass cap-and-trade legislation
tomorrow, it will be years before a cap-and-trade system would be put into effect. The integral delays of our nation's rulemaking process
would stall the date at which the cap-and-trade could become operational. Second, deciding on an appropriate baseline for emission
reduction tar-gets, how allowances are distributed, and the all-important decision regarding the use of offsets would further challenge an
early start date. Third, there is no certainty of the price required to achieve the promised reduction levels set forth by the reduction cap.
The carbon market is one of volatile price shifts. If the price of carbon is too high, there will be pressure to relax the cap. Too much
relaxation in this cap abolishes the carbon market.
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Carbon Tax Desirable: Answers to AlternativesCap-and-Trade (Fails) [contd]

7. Cap-and-trade may not cut emissions sufficientlymixed market signals
Despite common belief, cap-and-trade may send a very ambiguous message in terms of emission reductions. The goal is to reduce GHG
emissions, but this goal is achieved either by requiring polluters to purchase the right to pol-lute or, in the case of free allowance
distribution, use permits to pollute for free. Cap-and-trade programs that auction off all emission allowances give the same message of
internalizing the externalities. However, where allowances are distributed for free, the message is more ambiguous. In a sense, the
government is giving permission to pollute in the form of emission allowances. Finally, the wording surrounding both cap-and-trade and
carbon tax emission requirements sends different signals. Arguably, the biggest barrier of implementing a carbon tax is the societal
apprehension toward paying taxes. In the case of sending a signal to polluters, the word "tax" sends a stronger, more severe signal to
polluters than phrases like "the purchase price for a right to pollute." Phrases like this are designed by legislators to remove the stigma
surrounding pollution. However, governmental condemnation of pollution sends the message that pollution is bad and that methods of
development and production that reduce carbon emissions should be favored. Alternatively, it can be argued that the lack of a stigma
gives the opposite signal: the purchase price for a "right to pollute" puts less demand on society's need to reduce emissions. Overall, the
signal sent out to polluters is not nearly as important as the reductions in carbon emissions. If cap-and-trade is going to successfully reduce emissions, it will have to raise the cost of emissions. Support may be obtained by hiding this fact, but this deceptive approach is not
ideal for a long-term environmental policy.
8. Cap-and-trade schemes will burden the economy for many reasons

Furthermore, in times of recession and slow economic growth, like our nation is currently experiencing, a cap-and-trade system will
increase the burden on our economy. Cap-and-trade is designed to increase the cost of energy. During this economic crisis, an energy
policy that does not encourage a reduction in production costs is the wrong choice. A cap on emissions requires companies to increase
costs to consumers in order to compensate for the costs of purchasing emissions allowances. These additional costs will lead to a
decrease in energy demand that occurs simultaneously with an increase in the cost of energy, so companies will end up cutting jobs.
Whether directly affected by job losses or the increased prices on energy and energy intensive goods and services, everyone will feel the
impact of cap-and-trade. Even in a booming economy, cap-and-trade is not beneficial. An emissions cap will force companies to spend
significant resources to adopt cleaner means of production. As mentioned, these adaptation costs will be placed onto consumers,
increasing the price on all goods and services requiring energy as an input. This price increase will make American goods less
competitive in the world market. This will incentivize companies to produce overseas in a country with no cap-and-trade. As such, capand-trade has the capability to impair even a flourishing economy. In addition, there is no certainty that implementing cap-and-trade will
result in real reductions of GHG emissions, particularly ones that the economy can afford.
9. Cap-and-trade is undesirablevery expensive to administer

Despite the many advantages stated, especially by politicians, the cap-and-trade program has numerous draw-backs. First, the statement
that the allowances of a cap-and-trade program will be auctioned off to raise revenue is often at least partially false. The most common
method for initially implementing a cap-and-trade program is to give at least some portion of the allowances out free of charge.
Therefore, the government either raises little or no revenue. Second, there can be extreme price volatility in the implementation of the
program, especially when industries are worried about shortages and those worries affect the emissions trading market. Arguably, the
biggest domestic disadvantage, however, is the cost of administration. Implementing a cap-and-trade program means answering
questions, such as how many allowances should be provided, should allowances be distributed, what type of certification program
should be in place, how should allowance reductions occur in the future, what the business plan should be for those decisions, and how
long should the allowances should last. Those worries are only with how to implement the program. After implementation, additional
questions arise as to how to enforce the program, what sanctions should apply, market regulation, and how revenue is spent.
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Carbon Tax Desirable: Answers to AlternativesRegulations

1. Command and control mechanisms are inefficient and less flexible than other approaches
Conventional approaches to environmental policy employ uniform standards to protect environmental quality. Such commandand
control regulatory standards are either technologybased or performancebased. Technologybased standards typically require the use of
specified equipment, processes, or procedures. In the climate policy context, these could require firms to use particular types of energy
efficient motors, combustion processes, or landfillgas collection technologies. Performancebased standards are more flexible than
technologybased standards, specifying allowable levels of pollutant emissions or allowable emission rates, but leaving the specific
methods of achieving those levels up to regulated entities. Examples of uniform performance standards for greenhouse gas abatement
would include maximum allowable levels of CO2 emissions from combustion (for example, the gramsofCO2permile requirement for
cars and lightduty vehicles recently promulgated as part of U.S. tailpipe emission standards) and maximum levels of methane emissions
from landfills. Uniform technology and performance standards can in principle be effective in achieving some environmental
purposes. But, given the ubiquitous nature of greenhouse gas emissions from diverse sources in an economy, it is unlikely that
technology or ordinary performance standards could form the centerpiece of a meaningful climate policy. Furthermore, these command
andcontrol mechanisms lead to noncosteffective outcomes in which some firms use unduly expensive means to control pollution.
Since performance standards give firms some flexibility in how they comply, performancebased standards will generally be more cost
effective than technologybased standards, but neither tends to achieve the costeffective solution. Beyond considerations of static cost
effectiveness, conventional standards would not provide dynamic incentives for the development, adoption and diffusion of
environmentally and economically superior control technologies. Once a firm satisfies a performance standard, it has little incentive to
develop or adopt cleaner technology. Regulated firms may fear that if they adopt a superior technology, the government may tighten the
performance standard. Technology standards are worse than performance standards in inhibiting innovation since, by their very nature,
they constrain the technological choices available.
2. Command-and-control regulations are only of limited effectiveness

Command-and-control regulation has inefficiencies and can sometimes lack effectiveness. According to one source, "the distinguishing
feature of command-and-control systems... is that compliance is largely an administrative matter", which can allow parties potential
redress through an administrative hearing or through the courts. Command-and-control regulations, because of their strictness in terms of
compliance, will often lead to litigation over "inevitable ambiguities." Command-and-control regulations sometimes incorporate
flexibility into the regulation. Even in this case the regulation "still requires the identification of the regulated entities, some
administrative determination of how those entities ought to best reduce pollution, and perhaps most vexing of all, what compliance
means." The administrative determination has an administrative process which is generally costly and lawyers can force the agencies to
abide by its own mandate procedures; thus, agencies have to take great care to follow those procedures including responding to
interested parties' comments. Research may have to be done in order to determine what standard should be set which is also costly. Even
with a flexible standard, there is still ambiguity, which inevitably will have litigation costs associated with the ambiguity.
3. Command-and-control regulation is likely to be ineffective in limiting carbon emissions

Command-and-control systems have evolved over the years to become a bit more sophisticated in dealing with various other
environmental issues. Command-and-control systems have met with limited success in certain circumstances, such as sulfur-dioxide
emissions. While those systems may be appropriate in those limited circumstances, they likely are not the best or most effective systems
for reducing carbon emissions. Industries are likely to respond to regulations by filing lawsuits and driving up the costs of
implementation of the system. This result is even more certain with stricter regulations.
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Carbon Tax Desirable: Answers to AlternativesRegulations [contd]

4. Market-based approaches are better than caps
It may be a leap of faith to focus on market-based solutions for environmental problems that have their origins in the dramatic increase
in carbon dioxide emissions that have accompanied industrialization and development around the world during the last 150 years. Yet,
precisely because the increase in carbon dioxide emissions is occurring throughout the world and across all sectors of the global
economy, a market-based approach may be the best way to address all sources of carbon dioxide emissions. 9 In contrast, the regulatory
approaches described above necessarily target individual market sectors, which may lead to uneven emission controls.
5. Carbon taxes are superiorcannot be manipulated by special interests

Carbon taxes avoid all that. A carbon tax simply imposes a tax for polluting based on the amount emitted, thus encouraging polluters to
clean up and entrepreneurs to come up with alternatives. The tax is constant and predictable. It doesn't require the creation of a new
energy trading market, and it can be collected by existing state and federal agencies. It's straightforward and much harder to manipulate
by special interests than the politicized process of allocating carbon credits.
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Carbon Tax Desirable: Answers to AlternativesSubsidies

1. Subsidies are an inferior optionmultiple reasons
2010, p. 85-86.
Subsidies, further down the spectrum, are undesirable for a number of reasons. Direct subsidies provide funds to encourage transactions
that might not otherwise occur. In addition, they can prop up industries that would otherwise fail. While subsidies are valuable for this
very reason - keeping projects afloat that the political process deems worth-while - they create market distortions and provide arbitrary
windfalls to certain companies. A tax credit for hybrid cars, for example, may have the desired effect of stirring interest in hybrids, but it
may also create an unintended windfall for the hybrid manufacturers who experience an artificially inflated demand. Assuming they are
al-ready producing hybrids at peak capacity, the subsidy does not put more hybrids on the road, just more expensive ones. Another
common flaw of direct subsidies is that they do not create sustainable demand, but only an interest to the maximum subsidized level.
Once a subsidy amount for a particular industry is drawn down, the motivation for future innovation may no longer exist. Subsidies are
also flawed because they do not capitalize on the commercial expertise of the private sector. Investors who have dollars at stake have
strong incentives and developed business practices to monitor their investments. Subsidized projects, on the other hand, are typically
subject to political pressure and are not monitored with the same kind of bottom-line pressure. Without the capital inputs that are typical
of a private funding arrangement, innovators may struggle with a lack of guidance. The main concern with subsidies is the governmental
role as arbiter. A subsidized interest gains a competitive ad-vantage over other interests, and politically made energy policies rarely
follow economic realities. A myriad of questions must be asked and answered before a government can responsibly enact a subsidy. Is it
better, for example, to favor home solar installations or larger, more efficient industrial facilities? Should the policymakers choose
hybrid cars over biodiesels? Even if industrial installations are more efficient or electric cars are more adoptable, a government may
choose to support a particular policy for political reasons. Many of these policy questions are difficult to answer, and these subsidies
often lead to unintended consequences, like windfalls for particular manufacturers. A better approach is to encourage a range of
activities and allow the natural selection of the market to determine which technology will prevail. Along similar lines, specific
government projects like Apollo present the same drawbacks as subsidies but to a higher degree. To justify such a project, the end goal
of the project must be ascertainable. The concrete objective of the Apollo Project, for instance, was to put a man on the moon. No such
single goal presents itself in the energy revolution. Despite the challenges presented by subsidies, however, direct government support
may have a limited role to play within a larger carbon tax framework. The private market will be the predominate engine of change, but
some well-placed subsidies could provide a shot in the arm, speeding up the shift to renewable energy. For example, the up-front capital
costs and logistical complexity of developing a new grid present a compelling situation for government initiative and support.
2. Carbon taxes are more efficient than clean energy subsidies

A carbon tax is also more efficient than subsidies for clean energy technologies for several reasons. First, it is very hard to target
subsidies toward the most cost-effective abatement, both because the government does not know which technologies will be most cost
effective and because it is hard to implement a program that is not prone to political favoritism. Second, it is nearly impossible to
preclude subsidizing abatement that would happen anyway. Clean energy subsidies can also have the perverse effect of increasing the
overall supply of energy and making it cheaper, partly offsetting the benefits of the subsidies. In short, it is easier to be cost effective in
discouraging things we do not want than encouraging things we do want.
3. Carbon taxes will make clean energy subsidies redundant

Fourth, a carbon tax could allow lower clean energy subsidies and less burdensome regulation. Numerous tax expenditures, loan
guarantees, and other subsidies currently encourage deployment of renewable energy technologies and related research and development
(R&D). With a carbon tax in place, some of those subsidies would compensate investors for what they would do anyway or distort
investment toward higher cost abatement. Embedding a carbon tax in broader fiscal reform should allow lower federal direct and tax
expenditures on those programs.
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Carbon Tax Desirable: Answers to AlternativesSubsidies [contd]

4. Carbon taxes are superior to subsidiescan be calibrated as we learn more about climate and the taxs effects
The carbon tax proposal is based in part on agnosticism and humility. First, while there appear to be solid reasons to believe that human
activity is contributing to global warming and that global warming may present serious risks to humans and other inhabitants of this
planet, neither of those statements is entirely free from doubt. Even accepting those statements, it is not clear how serious the impact will
be or how soon it will arrive. There is also uncertainty as to the trade-off between alleviating these risks and other social values, such as
freedom and economic well-being. Second, it is not clear how best to proceed. The Appendix briefly describes and evaluates systems of
subsidies, regulation, and cap-and-trade. These systems might promise more definite reductions in carbon emissions, but the value of
that definiteness is constrained by the limits of our knowledge. Those approaches thus might reduce carbon too little or too much, and
they might impose excessively or too little on other values such as freedom and economic well-being. With experience, a system of
carbon taxes can be modified more easily than subsidies that may already have been spent (perhaps unwisely), regulations that may
require substantial business expenditures for compliance and government expenditures for enforcement, and purchases of carbon
emission rights that may lose value. It is clear that the carbon tax will have the desired effect of putting downward pressure on the level
of carbon emissions, and that pressure may be adjusted relatively easily by increasing or decreasing the tax rate in light of experience.
However, it must be admitted that all of these approaches will have substantial costs and are likely to involve mistakes and false starts.
5. Subsidies will be ineffective in cutting CO2 emissions

Government subsidies are likely the least effective solution to the carbon-emissions issue. Subsidies are also likely to be the most
politically popular idea for reducing carbon emissions. The government should not try to pick the most effective solution; this is a job
best left to industry and innovation in the private sector. Subsidies are likely to be a waste of government resources, and it is even
possible that - due to ambiguity in the laws - the government could wind up subsidizing the over-emission of carbon.
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Carbon Tax Desirable: Answers to Conservative Objections

1. A carbon tax can be used to shrink governmentcan jettison other green energy policies
That's too bad, because the concept of a carbon tax actually makes sense --even, dare I say, to conservatives. I am talking here about a
pure carbon tax -- a per-chemical-unit surcharge applied at the retail level to the sale of gasoline, home heating oil, natural gas, coal or
any other fuel that yields carbon dioxide. Consider the benefits, from a traditional, conservative perspective. 1) A carbon tax can actually
make government smaller. Right now, Western governments control and tax the use of carbon fuels through a bewildering variety of
economic interventions. These include everything from fleet-wide fuel economy standards for auto manufacturers, to ethanol subsidies,
to small-car purchase rebates, to alternative-power research grants. By monetizing the social cost of carbon usage in a generic way, a
carbon tax could replace all of these programs through one simple microeconomic mechanism. Overnight, a whole army of green
lobbyists, bureaucrats and environmental consultants could be turned away from the public trough.
2. A carbon tax is relatively flatis conservative in the sense that it does not redistribute income
2) A carbon tax is a (relatively) flat tax. Since a carbon tax is essentially a consumption tax, it would help chip away at the massive bias
against the wealthy contained in our "progressive" income tax system. That's because wealthy people typically spend a lower percentage
of their income on consumption than do the poor and middle-class. If a carbon tax were applied in a truly revenue-neutral way -- with
revenues offset by across-the-board reductions in income tax or, better yet, capital gains and business taxes -- Canada would be a nation
far more welcoming to the successful and the talented.
3. Carbon taxes will create a more conservative, family-friendly society for several reasons
3) A carbon tax can help create a more socially humane, family-friendly society. Many people casually associate the word
"conservative" with unfettered capitalism. That is a fallacy. A true conservative in the Edmund Burke mould is suspicious of any
revolutionary creed that challenges the established qualities of a humane society, especially a creed -- such as unbridled materialism -that corrodes family life and human spirituality. The auto-dependant, air-conditioned, eight-lane suburban lifestyle made possible by
cheap oil has created a nightmare not only for our environment, but also for family dynamics and civil society as a whole. Millions of
Canadian fathers and mothers now spend little time with their families -- because their early mornings and evenings are spent alone, in
metal boxes, fighting traffic. Modern suburban developments have no sidewalks -- because no one walks. Nor does anyone spend time
mingling in mixed-use, high-density commercial areas. They are too busy navigating that other alienating creature of cheap oil: the
mega-mall. A carbon tax would improve society along conservative lines by encouraging people to live closer to their places of work. It
would discourage the inhabitation of large, impersonal swathes of tract housing in favour of higher-density apartments and townhouses
located closer to parks, schools and downtown shops -- the traditional breeding grounds of civil society.
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Carbon Tax Desirable: Answers to Cost Shift

1. Carbon taxes still provide social benefits even if their entire cost is passed along to consumers
If one accepts that some level of carbon pollution is, at least in the absence of truly viable cost-effective alternatives, acceptable, then the
matter of determining the appropriate level of carbon pollution becomes an application of economics. Parties have a tendency to
overpollute since they do not bear all the costs associated with the pollution. This is due to the problem of the "tragedy of the commons,"
a concept first popularized in 1968. In essence, polluters are able to make use of a resource (in this case, the air) without cost, although
there is a cost associated with this use. Since the polluter is not paying the cost of using the resource, there is an incentive to overuse the
resource. The costs of such use are described as being externalized to society. A carbon tax is a form of Pigouvian tax--a tax imposed on
market actors to rectify some form of market failure, specifically the imposition of negative externalities. The negative externality of
pollution is that it imposes a cost on all members of society (including the polluter) without the benefits being similarly disbursed. In this
case, the bene-fits of lower production costs generally accumulate to the polluter. A carbon tax shifts the burden of this activity away
from society to the polluter, thereby more closely aligning actual costs and benefits associated with an activity and providing better
incentives for private actors to utilize resources in a socially optimal fashion. Extending this analysis, the concept of the polluter in this
context may reach beyond the party that emits the carbon into the air. For example, in the case of manufactured products, the consumers
of the end products may justifiably be regarded as causing the pollution in question, since it is their demand for the relevant end product
that leads to the production process that creates the pollution. The benefits referred to may be passed on in the form of prices lower than
they would be in the absence of the externalization of some of the input costs. The analysis is equally applicable, since lower costs (due
to the negative externalities) may be passed on to consumers in the form of lower prices, implying overconsumption of the relevant
product, which utilizes the common resource. Even if the burden of the Pigouvian tax is passed entirely onto consumers, this still creates
the right incentives, since manufacturers produce only in response to consumer demand. If the tax results in a lower demand, this will
lead to a reduction in output, requiring less of the common resource as an input, resulting in a more optimal allocation of resources.
2. Tax costs will not entirely be borne by consumersfossil fuel consumption will decrease
Second, it is not clear that the price of consumed carbon will rise by the amount of the carbon tax. Some of the tax may be absorbed by
the producers of carbon. The degree of price-shifting depends on the relative elasticities of supply and demand, but it is unlikely that the
tax will be borne entirely by consumers. One would expect sales of carbon-based products to fall because of the price increase created by
the carbon tax. To mitigate that drop in sales, the producer of those carbon-based products might slightly reduce the price to avoid an
overly steep drop in sales, thus absorbing part of the tax.
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Carbon Tax Desirable: Answers to Domestic Action Fails

1. A domestic carbon tax will workstill drives innovation
2010, p. 95-96.
The benefits of a carbon tax, furthermore, do not necessarily depend on international cooperation. While global cooperation is the
ultimate goal, a well-designed carbon tax could benefit an individual country by fostering domestic innovation without driving out
industry. Observable benefits may make a carbon tax attractive for self-adoption in numerous countries vying to be the next growth
centers for clean tech. A U.S. carbon tax, for example, could tax fossil fuels, both domestically produced and imported, while rebating
the tax on exports. Such a system would provide a clear signal to domestic innovation while eliminating the incentive for companies to
outsource or relocate. Other countries, without being compelled by a supra-national agency, may adopt their own carbon tax with similar
protectionist measures to capitalize on the upside of new technology market growth. On the other hand, a more complicated cap-andtrade system may eventually provide similar market signals, but because it relies more heavily on international cooperation, countries
opting to not bind themselves present more opportunity for overall leakage and avoidance.
2. Carbon taxes will have international effectstechnological innovation

2010, p. 96-97.
Lastly, carbon taxes may benefit the global effort in preventing climate change without requiring participation from all countries. Carbon
taxes that fuel innovation in the leading industrialized countries like the United States, Denmark, Germany, Japan, and Canada can spur
clean technologies to the point of economic scale when distribution to less industrialized countries becomes cost effective. Just as
Chinese automakers are aiming to skip the current technology of gas-powered vehicles by jumping to newer electric technologies, many
countries that lag technologically can make a virtue of a liability. Emerging market powers like India, Brazil, and China may have the
option of implementing new solar and wind technologies without ever investing in conventional grid infrastructure. Furthermore, given
the size of these markets, even modest adoption rates of solar, wind, and other renewables could result in significant global reductions in
clean tech costs. China, for example, despite its poor environmental track record and reputation for polluting, just overtook the United
States as the world's third largest producer of solar panels, after Germany and Japan. The United States and other clean tech leaders have
a significant role to play in providing funding, technology, and knowledge in the diffusion of clean tech. A carbon tax, regardless of
whether countries like China and India are among the first to adopt it, feeds the dynamic of the innovation-based environmental
protection model. Spillover from industrialized to industrializing markets contributes to the creation of a worldwide clean tech market.
Both types of markets benefit from competition and collaboration, and a worldwide market creates greater scale and diversity in
technology developments. The United States has already experienced the benefit of Chinese interest in clean tech and can expect more to
come. "Companies from China are already tapping American equity markets, creating [a] frenzy over Chinese solar stocks, reflecting the
confluence of two major trends: [China's] growing interest in clean technology stocks and demand from investors for more plays on
China's booming economy." A worldwide clean tech market invites new opportunities for entrepreneurial companies across the globe.
Including India and China in the market-based solution to climate change is critical to the international negotiation dynamic. These
countries, as an inescapable part of the global problem, must be part of the global solution.
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Carbon Tax Desirable: Answers to Equity Concerns

1. A well-designed carbon tax will offset any costs imposed on low-income persons
Chad Stone, Chief Economist, Center on Budget and Policy Priorities, Good Climate Policy Doesn't Hurt the Poor, U.S. NEWS &
WORLD REPORT, 92515, www.usnews.com/opinion/economic-intelligence/2015/09/25/fighting-climate-change-doesnt-have-tohurt-the-poor, accessed 1-5-16.
Those opposed to addressing climate change say such steps will hurt the poor. While the most cost-effective policies to reduce
greenhouse gas emissions, including a carbon tax, do raise the cost of using fossil energy, the poor need not be hurt by them. That's
because a carbon tax does two things. Yes, it raises the price of energy and other goods and services that compose a disproportionately
large share of low-income households' budgets. At the same time, however, it raises revenues that policymakers can use to offset that hit
to the budgets of those low-income households. As I explained recently at a Resources for the Future seminar on the impact of a carbon
tax on low-income households: Well-designed carbon-tax legislation can generate enough revenue to fully offset the hit to the most
vulnerable households' budgets from higher energy prices, cushion the impact for many other households, and leave plenty to spare for
other uses (whether deficit reduction, tax reform, or spending for other public purposes). The idea of using a modest portion of the
revenues raised from "putting a price on carbon" to protect low-income households is not new. The Waxman-Markey climate bill which
the House passed in 2009 (but which the Senate didn't consider) included a robust low-income-rebate provision that did just that.
2. We can reuse revenues to undercut the negative effects on poor people

Chad Stone, Chief Economist, Center on Budget and Policy Priorities, Good Climate Policy Doesn't Hurt the Poor, U.S. NEWS &
WORLD REPORT, 92515, www.usnews.com/opinion/economic-intelligence/2015/09/25/fighting-climate-change-doesnt-have-tohurt-the-poor, accessed 1-5-16.
All income groups derive some financial benefit from the revenue uses, greatly mitigating gross costs. Low-income households as a
group, in fact, are net winners. These results depend on the particular way the House bill used revenues. Other choices produce a
different pattern of net costs or benefits. A companion analysis presented at the same seminar illustrates this starkly. It compares a
simple policy that uses all the revenues to cut corporate income taxes with one that uses it all to provide a lump-sum rebate to every
household (not just the poor). In this analysis, the corporate tax cut produces somewhat larger aggregate economic benefits, but it's much
more regressive. The tax cut mainly benefits higher-income households while offsetting only a small fraction of the disproportionately
large gross costs of low-income households. The rebate, in contrast, provides net benefits for middle-class as well as low-income
households. (The analysis also looks at using all the revenues for an income tax cut on labor earnings, which produces results between
the other two on both counts.) Policymakers don't have to pick just one way to use the revenue. As I said earlier, they can use a portion
of it to provide robust but targeted low- income protection, leaving most of it to pursue other goals. If you're inspired by Pope Francis's
message of compassion for the poor and the urgency of addressing climate change, rest assured that these goals do not conflict.
3. Current low energy prices undercut the regressive effects of a carbon tax
On the other side of the ledger, there has always been the concern that a carbon tax would place an unfair burden on some middle- and
low-income consumers. Those who drive long distances to work, say, or who have homes that are expensive to heat would be
disproportionately burdened. Now that these consumers have received a windfall from the fall in energy prices, it would be possible to
impose substantial carbon taxes without them being burdened relative to where things stood six months ago. The price of gasoline has
fallen by more than a dollar. A $25-a-ton tax on carbon that would raise far more than $1 trillion over the next decade would lift gasoline
prices by only about 25 cents.
4. Tax offsets would minimize the economic effects

And it could be structured to be far less harmful to power consumers. While all the added costs under cap-and-trade go to companies,
utilities and traders, the added costs under a carbon tax would go to the government which could use the revenues to offset other
taxes. So while consumers would pay more for energy, they might pay less income tax, or some other tax. That could greatly cushion the
overall economic effect.
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Carbon Tax Desirable: Answers to Equity Concerns [contd]

5. Rebates address any equity problems
Another criticism is that a carbon tax disproportionately affects low-income consumers because they spend a larger proportion of their
income on energy than do high-income individuals. But a study from the Congressional Research Service showed that tax rebates, while
they would mean some reduction in tax revenue, could be successful in meeting this challenge.
6. Rebates will address any regressive nature of a carbon tax

A simple carbon tax will likely be regressive instead of progressive, and a carbon tax on just the power sector will potentially be more
regressive than an economy-wide program. Thats because low-income consumers spend a higher portion of their income on electricity
than high-income consumers, even though wealthy households tend to use more electricity because they live in bigger houses, own more
appliances, and generally have more demand for energy. Research from the Congressional Budget Office explored seven different
options for reducing the regressivity of a carbon tax via the tax code or targeted-spending programs. While none of its solutions are
perfect, it does find that an income-tax rebate or payroll-tax rebate can be very effective in addressing the challenge. This is because
these rebates reach a very broad number of people and can be targeted to specific income levels. Congress could also create a carbon tax
in the context of broader tax reform. If this is the case, the carbon tax need not be explicitly linked to a progressive fix, as long as the
overall reform package is progressive.
7. Multiple mechanisms can address any equity concerns

Policymakers can adopt a number of approaches that could hold poor households harmless, including reserving a share of the carbon tax
proceeds for targeted spending or rebates to qualifying households. Policies that return revenues to households in ways that blunt their
incentives to reduce energy consumption, such as via rebates on energy bills, would be substantially less efficient in lowering emissions
than policies that compensate households in other ways.
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Carbon Tax Desirable: Answers to Free Markets Superior / Autonomy

1. Carbon taxes correct market failuresthey allow us to tax the bads
It has been seemingly presumed, as evidenced by the provisions of the tax code, that "physical capital in the form of buildings, facilities,
and structures is an unambiguous good." Favorable tax treatment given through the Internal Revenue Code is a form of a subsidy.
Perhaps the recent climate change debate has caused at least some people to question the logic of encouraging economic growth in this
manner. According to the Stern Review, "climate change is the greatest market failure the world has ever seen." Carbon taxation
provides an answer to the market failure problem. Taxing the "bads" is superior to subsidizing goods because the "bads" or causes of the
climate change problem are easier to identify than the proper solutions. Also, what we think today might be the correct solution might
change at some point in the future when better solutions are found. Finally, "carbon tax is capital neutral: it does not encourage the
formation of expensive physical capital that would inhibit future changes in production."
2. Pricing mechanisms encourage responsible behavior while preserving individual autonomy

2010, p. 75.
Assuming that encouraging the clean tech revolution is needed to both avoid the negative consequences of depleting the fossil fuel
resource and to capitalize on an economic opportunity, the next point of discussion is why a carbon tax is better than other policy
proposals. A carbon tax is attractive because it pulls the policy lever only slightly. It nudges natural consumption and development in a
sensible direction, but does not require a dramatic alteration people's behavior. A carbon tax avoids mandates that people stop driving
their environmentally noncompliant diesel trucks, or that a city buy thirty percent of its electricity from wind turbines. Rather, a small
fee on carbon creates greater cost parity between energy sources and operates at the margins of peoples' decision-making. Businesses
may tip toward greener ventures if the cost margins are slightly improved. At the consumer level, a difference of five cents on the dollar
- not thirty - between clean and carbon energy may allow people to opt for the more environmentally responsible choice. Such a nudge
does not tell people what they must not do, but protects our freedom of choice in the market-place.
3. Carbon taxes improve our overall tax policythey tax things we want to discourage
Along with the benefits discussed above, there is an additional reason why a carbon tax is desirable. Taxes are necessary to provide
revenue to pay for government programs, but any tax has ill effects. There will always be inefficiencies in collecting taxes. Taxpayers
incur costs to plan and comply with taxes, to avoid taxes, or perhaps to evade taxes. Tax collectors incur costs to enforce taxes. Tribunals
incur costs to resolve disputes over taxes. These costs waste resources. In addition, any tax distorts behavior, slowing economic activity
by withdrawing funds from the economy and reducing incentives to work, innovate, and take risks. What is taxed may affect these
harms. A tax on income, for example, may reduce incentives for working, saving, and financial risk-taking. A tax on consumption may
reduce expenditures on food, clothing, shelter, health care, and entertainment, which are some of the main goals of human activity and
should not be discouraged unnecessarily. In contrast, a tax on carbon discourages carbon use, which should have two major benefits. The
first is the reduction of carbon emissions that threaten to accelerate global warming. The second is the value of carbon in its native form.
Coal and petroleum can be the raw materials for chemicals and medicines that can have great value to society. To burn those raw
materials unnecessarily is wasteful. We will, of course, continue to tax incomes and consumption, but we must ask how much higher to
push the marginal tax on each, or how much of a tax reduction on either to forgo, as opposed to imposing a tax on carbon. While there
are clear losses to society in discouraging either income or consumption, it is hard to see a comparable loss to society from a reduction in
carbon usage.
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4. Market intervention in this case is justifiedwe need to correct for market errors
2010, p. 85.
In shaping technological advancement, governments have a range of policy methods at their disposal. At one end is the laissez faire
approach where governments simply allow the free market system to run its course. In a laissez faire approach, private investors will
continue to be drawn to a growing market for clean technology to some degree. Use of legal frameworks to indirectly signal the
increasing value of cleaner technology to private investment falls closer to the middle of the spectrum. By assigning costs to
environmentally unsound practices, such as fining companies for illegal dumping, incentives are formed to create easier and cheaper
environmental compliance. A third approach involves a more proactive governmental role by directly funding the research and
development of technological advancement. The United States, for example, pushed along nuclear energy technology through direct
funding. At the far end of the spectrum is an intense and focused government-initiated method, where the government establishes a
specialized institutional structure to develop a specific solution. The Manhattan Project and the Apollo Program are examples of the U.S.
government meeting specific, extraordinary goals. For a project of this magnitude, the second option - creating a legal framework to
guide the private sector - is the wisest policy. A framework of incentives strikes the right balance of not calling on the government to
innovate, but in-stead to facilitate private innovation. The other options on the spectrum pose significant drawbacks. As discussed above,
a laissez faire approach is not a true possibility in the energy field. The U.S. government has extensively subsidized the development of
fossil fuels through direct tax breaks or indirect subsidies like the creation of a massive road network. Moreover, a decision to maintain
the current course is less laissez faire than a continuation of policy directives that favor the mature, established industries.
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Carbon Tax Desirable: Answers to Protectionism / WTO Compliance

1. We can design a WTO-compliant tax that addresses any competitiveness concerns
Some worry that taxing fossil fuels will hurt the competitiveness of U.S. industry and encourage offshoring. In fact, a well-designed tax
would be levied on the carbon content of all imports coming from countries that did not impose their own carbon levies. The United
States can make the case that such a tax is compatible with World Trade Organization rules. Such an approach would have the virtue of
encouraging countries who wished to avoid the U.S. tax to impose carbon taxes of their own, thereby further supporting efforts to reduce
global climate change.
2. Border taxes could well be excepted from WTO rules

This paper has demonstrated that a carbon tax is preferable from an economic perspective to the alternatives normally considered in
addressing control of carbon emissions. While a carbon tax may have difficulties in being WTO-compliant, these problems arise at least
to the same extent under those alternatives. For example, an ETS may encounter significant difficulties in identifying the appropriate
BTA to apply to imports under Article III due to the constantly fluctuating nature of the prices (representing the charge imposed). A
command-and-control approach mandating the use of emission-reducing technology provided by the government at no or reduced cost
may represent an illegal subsidy under Article VI. The major hurdle for a carbon tax to be legitimate under the WTO is its uncertain
status as an indirect tax--that is, as a tax on a product rather than on the producer (or the PPM). There are strong arguments in both
directions, making this the major hurdle in terms of introducing an economically appropriate carbon tax. There is strong potential,
though, that even if a carbon tax BTA were found to violate the substantive provisions of the WTO, it may qualify for one of the
exceptions under Article XX. Based on comments in the Shrimp-Turtle decision, the chances of this occurring are maximized if it can be
demonstrated that there are no viable alternatives to meeting the relevant objectives and that attempts have at least been made to reach a
multilateral agreement (even if such an agreement is not forthcoming).
3. A carbon tax would be compliant with WTO rules

Traditionally, the proposals call for the carbon tax to be imposed on energy, which is included in all goods and services. This leads to
WTO regulation analysis that is straightforward. As long as the tax rate applies equally to each like product, for example a separate tax
on coal, oil, and gas, irrespective of where the fossil fuel originated from, it will satisfy the most favored nation principle. Additionally,
the carbon tax must be imposed both internally and for foreign products. Assuming that the tax is structured in such a way as to be
uniformly enforced, it will then satisfy the national treatment principle. Given the ability for a carbon tax to clearly satisfy both the most
favored nation and national treatment principles, it does not need to use the Article XX chapeau, but will also likely be determined to be
imposed uniformly and not a hidden restriction on trade.
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Carbon Tax Desirable: Answers to Protectionism / WTO Compliance [contd]

4. Reinvestment schemes will not violate global trade rules
In his book, Socially Responsible Investment Law: Regulating the Unseen Polluters, Benjamin Richardson states that, "the investment
community continues to downplay inclusion of environmental and social criteria for consideration in corporate financing decisions."
Consistent with his thought is the argument that international investment law poses potential barriers to climate change regulation. Miles
identifies several cases where investment laws have trumped environmental protection efforts, noting that in any conflict between the
interests of investors and cli-mate change regulation measures, very little weight is given to international environmental issues. The
potential for claims of indirect expropriation, discriminatory treatment, and breaches of fair and equitable treatment threaten cli-mate
change mitigation methods that include the allocation of permits or "rights to pollute." Under the General Agreement on Tariffs and
Trade / World Trade Organization (GATT/WTO) regime, world trade must follow three fundamental obligations. The first is the mostfavored-nation (MFN) principle, which requires any advantage that is pro-vided to a product to be provided to all like products. The
second principle, the national treatment principle, requires that foreign products be treated no less favorably than domestic products. The
third principle is most relevant for cap-and-trade. The prohibition on quantitative restrictions prevents countries from using embargoes,
quotas, or licensing schemes on imported and exported products. With a cap-and-trade system, these international investment and trade
laws are a true threat. If imports were to be included, and thereby limited, under a cap-and-trade sys-tem, an import quota would be
implied. Setting quotas violates WTO law. However, this will not be the case with the carbon tax with reinvestment. With an across-theboard tax on set quantities of carbon, there are no issues of discrimination or equity, nor is there an issue of violating WTO laws
forbidding taxes on imports, "in excess of those applied, directly or indirectly, to like domestic products." As long as the taxes are paid,
companies are under no obligation to change or experience indirect expropriation. A key challenge is to ensure that the objectives of
these areas of law are able to align, rather than cross, in order to move forward to reduce the effects of climate change. The simplicity of
the system will allow the carbon tax with reinvestment to avoid clashing with the ever-favored international investment laws. The
effectiveness of a carbon tax with reinvestment on the international level could benefit the United States in several ways. First, effective
emission reductions would mitigate the negative environmental and social health impacts of climate change. Second, the tax will
encourage economic advancements through infrastructure development and new job creation. Finally, the international effects resulting
from the carbon tax with reinvestment will assist the United States in maintaining its standing as a world leader.
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Carbon Tax Undesirable: Topshelf

1. Carbon taxes reverberate throughout the economyincrease the cost of carbon energy, which our economy
depends upon
Daniel W. Kreutzer, PhD, Senior Research Fellow, Heritage Foundation, Testimony before the Senate Finance Committee, 91614,
www.heritage.org/research/testimony/2014/11/the-impacts-of-carbon-taxes-on-the-us-economy, accessed 1-5-16.
Hydrocarbon fuels provide 85 percent of energy in the U.S. So, a tax on carbon-dioxide will drive up energy costs. These higher energy
costs work their way through the economy raising costs of production, reducing income and reducing employment. Analyses by both
The Heritage Foundation and the Energy Information Administration project impacts of carbon taxes that show employment losses
exceeding 1,000,000 jobs and income losses (GDP) exceeding a trillion dollars by 2030. Taxes have two general categories of costs. The
first is the tax revenue, called the direct burden in economic jargon. The second is the cost imposed by the taxs price distortions, called
the excess burden in economic jargon. A simple (if extreme) example will illustrate these different impacts. Suppose there is a
$3,000,000 per gallon tax imposed on dairy products and with this tax in place a single gallon of ice cream is purchased each year. The
tax revenue (direct burden) is $3,000,000. The excess burden is the value lost by destroying the dairy industryfarmers, processors,
vendors, etc.minus any gains by those who produce and sell whatever substitutes replace a portion of the lost dairy products. In
addition the excess burden would include the lost value to consumers who give up ice cream, milk, cheese, etc. for less appealing
alternatives. The economic impacts outline above (and discussed further below) include only the excess burden. At least in the Heritage
analysis, the tax revenue is rebated immediately and directly to taxpayers. What remains is the damage done to the economy.
2. The economic losses outweigh the benefitssophisticated economic modeling proves

13, p. 8.
Our analysis has modeled the economic and energy market impacts of two carbon tax cases, one in which the carbon tax is set at $20 per
metric ton of CO2 in 2013 and increases by 4% per year in real (2012) dollars and one in which the carbon tax rate is the same in the
early years but eventually increases to very high levels in efforts to target an 80% reduction in emissions by 2053. Under both cases, the
net carbon tax revenues to the Federal government are used to reduce the Federal debt and PIT rates. We use a CGE model of the U.S.
economy with regional and sectoral detail to estimate the economic effects of these carbon tax cases. The model we use includes a
methodology for estimating the national economic benefits from using part of the net carbon tax revenues to reduce Federal debt
payments and part of the net carbon tax revenues to reduce the marginal tax rates on labor and capital. The combined economic gains
from these two uses of net carbon tax revenuesreduced debt and reduced PIT ratesare estimated to be substantial under both carbon
tax cases. Nevertheless, our analysis finds that those economic benefits are more than offset by the economic costs that result from the
new tax burden of the carbon tax cases. Thus, our results indicate that the net economic impacts of both carbon tax cases are negative, as
judged by the summary impact measures for the U.S. as a whole reported above.
3. Even a huge tax will not address climate changeeliminating emissions now does not make a significant
difference
Some would argue that the CO2 reductions create benefits from reduced global warming and the value of these benefits more than
offsets the cost of a million lost jobs and trillions of dollars of lost income. There are several ways of looking at these suggested benefits.
Estimates of a carbon taxs impact on world temperature do not lend much support for a carbon tax. Climatologists Pat Michaels and
Chip Knappenberger provides an online calculator to estimate the impact of various cuts in CO2 emissions. The calculations are based
on the MAGICC model developed at the National Center for Atmospheric Research. The AEO2014 side case for the $25 per ton carbon
tax would cut energy-related CO2 emissions by about 50 percent by 2050 (overall emissions would probably drop by a slightly smaller
percentage). These cuts translate to a temperature moderation of about 0.05 degrees centigrade (about 0.09 degrees Fahrenheit) by the
end of this century. Few would argue that this virtually unmeasurable impact is worth the million lost jobs and trillions of dollars of lost
income. Even eliminating carbon dioxide emissions entirely and assuming the highest sensitivity of world temperature to carbon dioxide
levels (which happens to be the sensitivity that is furthest from that in recent research) would project a temperature moderation of less
than 0.2 degree centigrade. Of course, eliminating CO2 emissions entirely, if possible, would have much higher costs than even those of
the $25 carbon tax modeled by the EIA or the Boxer-Sanders tax modeled by Heritage.
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4. Do not believe their evidencethe numbers on carbon taxation are easily manipulated
Marlo Lewis, PhD and Senior Fellow, Competitive Enterprise Institute, Oils Swoon Is Not an Argument for Carbon Taxes, Cooler
Heads Digest, 1615, www.globalwarming.org/2015/01/06/oils-swoon-is-not-an-argument-for-carbon-taxes/, accessed 1-2-16.
In the imaginary universe of blackboard economics, corrective taxes by definition improve the efficiency of capital investment. But in
the real world of political economy, the social cost of carbon (SCC) the alleged damage to be corrected by carbon taxes is an
unknown quantity, and SCC analysis has become a menace to society. SCC analysts can get just about any result they desire by fiddling
with non-validated climate parameters, made-up damage functions, and below-market discount rates. Through garbage-in, garbage-out
computer modeling, SCC analysts can make carbon energy look unaffordable no matter how cheap, and renewable energy look like a
bargain at any price. They can also dupe themselves and others into believing that carbon taxes will make us richer, healthier, and more
energy secure.
5. A carbon tax would not work globally and an American one would be too small to meaningfully cut emissions
Oren Cass, Senior Fellow, Manhattan Institute, The Carbon-Tax Shell Game, NATIONAL AFAIRS n. 24, Summer 2015,
www.nationalaffairs.com/publications/detail/the-carbon-tax-shell-game, accessed 1-8-16.
The international community has established a goal of limiting the increase in average global temperature to 2 degrees Celsius, believing
that warming above this threshold poses unacceptable risks of climate-related catastrophe. Achieving this goal requires reductions in
global CO2 emissions on the order of 50% by 2050, according to the IPCC. With emissions still increasing rapidly in the developing
world, developed nations are typically expected to make substantially sharper cuts. According to the Obama White House, the U.S.
government's official goal for 2050 is an 80% emissions reduction. Annual U.S. emissions represent less than one-fifth of the global
total, however, and our share shrinks every year, so even a zeroing out of our emissions would achieve little without dramatic changes in
global behavior. The effectiveness of a carbon tax, as a matter of environmental policy, would therefore depend not only on how it
would directly alter the trajectory of American emissions, but also on its ability to affect global emissions by driving globally applicable
technological innovation or by influencing the behavior of foreign governments. On each of these dimensions, the carbon tax fails. It
would not, at the levels contemplated, come close to achieving America's own targeted reductions. On the global stage, it would not
make an already-implausible international agreement more likely, and, if anything, it would hinder those prospects. In the absence of
such an agreement, the only route to lower global emissions runs through technological innovation that makes low-carbon fuels cheaper
than conventional ones, but a carbon tax is poorly tailored to achieve that objective as well. For those serious about climate change, a
carbon tax is not the answer. To their credit, carbon-tax supporters rarely claim that their proposals have the potential to deliver on U.S.
emissions goals. The models for tax proposals frequently indicate reductions in the range of 15% to 30% by 2050, as compared to the
official 80% target or the more moderate 50% goal sometimes advanced by researchers. Indeed, carbon-tax proponents tend not to link
their proposals to any estimate of reduced warming, because the reductions amount to rounding errors. One might think this prima facie
failure would represent a fatal flaw, but such navet only flags one as an easy mark; the shells are just beginning their delicate dance.
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6. Carbon taxes are a terrible ideafive reasons
James V. DeLong, Vice President & Senior Analyst, Convergence Law Institute, A SKEPTICAL LOOK AT THE CARBON TAX,
Marshall Institute, 2013, p. 1-2.
The carbon tax finds theoretical justification in economic theory, but it is a deeply flawed idea. Five sets of consideration militate against
itthe five circles of Carbon Tax Hell: 1) A U.S. carbon tax will have only minuscule effect, if any, on global temperatures. 2)
Economic projections that purport to show that the costs are manageable fail to identify specific and feasible energy technologies that
will be deployed in place of carbon-based sources. They assume that technological and economic breakthroughs will occur. 3) While
economic theory provides support for a carbon tax (it is called a Pigovian Tax), the theory is more complex than usually represented.
Current proposals do not account for benefits that would accrue from higher atmospheric CO2 levels. Nor do they reflect all the positive
benefits of cheap energy that are not captured by the energy producers. 4) Predictions of climate change and assessments of the costs of
carbon tax both rely on mathematical models. Modeling is an inexact art, and both sets of models have deep flaws. They do not provide
an adequate basis for action. 5) A carbon tax will face many practical problems. It is supported by a Bootleggers-and-Baptists coalition
of environmentalists, corporate profiteers, and government dependents which will shape its provisions in ways that undercut its
beneficial effects and accentuate its harmful side. A carbon tax will reduce national GDP and inhibit job creation, will be regressive in its
effects, and will damage energy-intensive industries and pressure them to leave the U.S. Judging by past experiences, the carbon tax will
not substitute for other taxes or improve their efficiency, nor will it be implemented without political favoritism. It will not substitute for
other regulations. On the international side, it will force the creation of complicated regime of taxes and subsidies to reflect the actions or
inactions of other nations. Even strong proponents of a carbon tax admit that a system which does not include China will be unworkable,
but official Chinese statements show that China is unlikely to agree to any carbon tax that significantly increases the cost of energy and
inhibits its economic development. Political discussion would be improved if the term tax were reserved for levies designed to meet
the governments need for revenue, while imposing as little damage as possible on the economy. A carbon tax is not a tax in this sense; it
is a tool of social engineering, imposed to meet the goals of central planners. If this tool fails to meet the planners goal of a specific
target for reducing CO2 emissions, then other means will be deployed. Viewed from this perspective, the carbon tax enterprise suffers
from the fatal conceit inherent in any belief that central planners can guide an economy.
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Carbon Tax Undesirable: AlternativesCAFE Standards

1. We have the tech to meet 54.5 MPG by 2025, will cut oil use and greenhouse gas emissions
BOSTON GLOBE, editorial, Fuel Economy: Step on It, 112611, http://bostonglobe.com/opinion/editorials/2011/11/26/fueleconomy-step/Wo1KKcOgtDP4Um9v8bPB4I/story.html, accessed 1-11-16.
Detroit loves to boast about cars that go from zero to 60 in a few seconds, but now the industry has a chance to set a more meaningful
speed record: 54.5 miles per gallon by 2025. That average fuel economy standard, proposed by the Obama administration last week,
would save $1.7 trillion, cut oil imports by almost a quarter, and significantly reduce greenhouse gases. The administration said the
standards were developed with letters of commitment from Detroits Big Three and major foreign carmakers. But already, the National
Automobile Dealers Association is whining that millions of consumers will be forced into smaller, more expensive vehicles that may
not meet their needs. Thats not likely. Technology has caught up with every previous standard, allowing Americans to save fuel while
still driving the largest vehicles in the world. And the new standards are carefully crafted. One reason carmakers signed on initially was
because the rules allow for widely varying fuel-economy targets for cars and light trucks. So while a Honda Fit and Ford Fusion would
be expected to get 61.1 and 54.9 miles per gallon, respectively, by 2025, a Toyota Sienna minivan and Chevrolet Silverado pickup would
be expected to get only 39.2 and 33.
2. Higher fuel efficiency is the best way to cut emissions

David T. Hartgen, M. Gregory Fields and Adrian Moore, Impacts of Transportation Policies on Greenhouse Gas Emissions in U.S.
Regions, Reason Foundation, 113011, http://reason.org/news/show/greenhouse-gas-policies-cost-transp, accessed 1-11-16.
In short, policies aimed at reducing transportation-related CO2 emissions by improving overall fleet fuel efficiency are likely to have the
greatest relative and most cost-effective impact. Overall, technological improvements to vehicles resulting in higher fuel efficiency,
along with traffic signal timing and speed harmonization, hold out the most hope for significant reductions in future CO2 emissions.
3. Higher standards will help to reverse effects of climate change

Wendy Koch, Obama Seeks to Double Auto Fuel Economy by 2025, USA TODAY, Green House, 111611,
http://content.usatoday.com/communities/greenhouse/post/2011/11/obama-seeks-to-double-auto-fuel-efficiency/1#.UDXSpd3N95Y,
accessed 1-11-16.
The new CAFE (Corporate Average Fuel Economy) requirement for vehicles made between 2017 through 2025, which could be
finalized next summer after a 60-day public comment period, is a combined city/highway rating. In real-world driving, as opposed to lab
testing, the EPA has indicated that consumers should average about 39 mpg by 2025 -- up from about 22 mpg currently.
Environmentalists hailed what they said was their second major victory in a week, citing the Obama administration's surprise decision
Thursday to reroute and thus delay until after the 2012 election the 1,700-mile Keystone XL oil pipeline from Alberta, Canada through
six U.S. states to the Gulf Coast. "These standards are just what consumers want and the country needs," said Frances Beinecke,
president of the Natural Resources Defense Council. "By delaying a decision on the Keystone XL pipeline, and moving toward curbing
carbon dioxide pollution from new power plants, the president's initiatives will help wean America from its oil addiction and begin to
slow, stop and reverse climate change, and protect our health."
4. Raising CAFE standards will cut oil use

WASHINGTON POST, Fuel Efficiency Rules: The Second-Best Route on Oil Dependence, 7111,
www.washingtonpost.com/opinions/fuel-efficiency-rules-the-second-best-route-on-oil-dependence/2011/06/29/AGCohJuH_story.html,
accessed 1-11-16.
Enacting strong vehicle efficiency standards will not make America energy-independent. But as long as raising the gas tax is off the
table, pressing automakers to make their vehicles ever more efficient is one of the few things Obama can do to cut greenhouse gas
emissions and oil use by about a half-billion tons of carbon dioxide and about 1.1 billion barrels of oil over the life of vehicles
produced in 2025, assuming a 56.2 mpg standard, according to the Environmental Protection Agency.
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5. Increased fuel economy protects against oil shocks
Congressional Budget Office (CBO), ENERGY SECURITY IN THE UNITED STATES, 512, p. 27.
Reduce Gasoline Consumption by Gasoline-Fueled Vehicles. Policies designed to reduce the demand for oil, such as raising automobile
fuel-efficiency requirements or increasing the gasoline tax, could reduce the vulnerability of U.S. households and businesses to
permanent changes in oil prices. Higher fuel-efficiency standards would require the production of new vehicles that use less fuel per
mile, which would reduce the exposure of U.S. consumers to disruptions in oil prices. An increase in the gasoline tax would raise the
cost of consuming oil-based fuels and, in doing so, provide a financial incentive for households and businesses to find long-run
alternatives to consuming such fuels. Analogous to policies that would boost the production of oil, policies that reduced fuel
consumption would probably also result in slightly lower fuel prices. But even with lower prices, fuel consumption under those policies
would be lower, on balance.
6. Higher standards ease the pain of price spikes, limits their economic impact
Mark Cooper, Director of Research, Rising Gasoline Prices and Record Household Expenditures, Consumer Federation of America,
53111, p. 9.
Our analysis of the oil market, the auto market, household gasoline expenditures and the consumer economics of fuel economy standards
over the past several decades has led us to conclude that the cornerstone of an effective longterm response to the gasoline price problem
is to increase the fuel economy of the vehicle fleet. Lowering consumption would, obviously, ease the pain of future price spikes and, if
the cut is large enough, it might even moderate those price spikes because the U.S. is, by far, the largest consumer of oil and gasoline in
the world.
7. Fuel economy standards are the best way to address oil price volatility
53111, p. 25.
Over the past decade, whenever gasoline prices spiked, loud calls for shortterm measures to reduce the pain at the pump are heard.
Quick fixes, like gasoline tax holidays or releases from the strategic petroleum reserve may provide some shortterm relief, but treating
the symptom, rather than the cause is not going to solve the underlying problem. And, after a difficult decade there can be no doubt that
there is a serious longterm problem. Our research shows that, while the public is certainly justified in demanding immediate relief, it
also understands what the long term solution is. Over the course of the decade, federal and state policymakers have cobbled together the
building blocks with which to provide a meaningful long term solution. The most effective response to the longterm problem of rising
and volatile gasoline prices is to dramatically lower the consumption of gasoline. California and the Clean Cars states started in that
direction first. They should continue to drive these consumerfriendly policies forward by working for an emissions standard that
reinforces federal fuel economy standards and puts the U.S. on the path to doubling fuel economy by 2025. It would be extremely
harmful to consumers, the economy, the environment and national security if policymakers squander this opportunity.
8. Standards are key to driving the market towards higher fuel economy
53111, p. 24.
The fact that the market has shifted toward higher fuel economy is encouraging, but not a basis for abandoning standard setting. Our
analysis of the auto market shows that that there are numerous factors on both the supplyside and the demandside of the auto market
that cause it to produce less fuel economy than it should. Standards are an excellent way to address many of the market imperfections
that hinder the development of fuel economy. We believe that the standards played a large part in pointing the industry in this direction
and without standards, the market will not go far enough, fast enough.
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Carbon Tax Undesirable: AlternativesCap-and-Trade (Topshelf)

-
Emissions trading superior to carbon taxsix independent reasons

Gary E. Marchant, attorney, Global Warming: Freezing Carbon Dioxide Emissions: An Offset Policy for Slowing Global Warming,
ENVIRONMENTAL LAW v. 22, Winter 1992, p. 632-635..
Despite the potential advantages of a carbon tax, there are other important considerations that may make CO[2] emissions trading a more
effective mechanism for controlling CO[2] emissions. Although this Section does not attempt a complete and comprehensive
comparison of a carbon tax and an emissions trading program, the following six factors suggest that an emissions trading program may
have important advantages. First, an emissions trading program, unlike a pollution tax, can be reasonably certain to achieve a specified
quantity of emission reductions. An emissions trading program can directly control total emissions by determining the quantity of
emission rights that are allocated. Under a pollution tax, however, regulators must guess the appropriate magnitude of a tax that will
result in a given level of emission reductions. Two commentators who have been integrally involved with EPA's emissions trading
program under the Clean Air Act (CAA) recently wrote: Emission fees cannot secure specific tonnage reductions by fixed deadlines,
since such fees require complete knowledge of industry control costs and constant adjustment to avoid under- or over-control. Emissions
trades can guarantee such reductions by fixing their amount and letting the market determine who can produce those reductions most
cheaply . . . Because regulators have imperfect knowledge of the cost structures and price elasticities of firms, they would have difficulty
setting a carbon tax rate that ensures that the United States achieves CO[2] emission reductions specified by future international
agreements. Regulators would be forced either to intentionally over-tax emissions to ensure that the national quota is achieved; or to risk
having to continually adjust the tax rate if it does not result in sufficient emission reductions. In fact, since CO[2] emissions are projected
to increase with time, and if the goal of a carbon tax program is to stabilize and reduce emissions, then regulators would have to increase
the tax gradually. This is because the tax rate would have to become progressively steeper to achieve the increased emission reductions
required in each successive year. Implementing such an escalating tax is likely to be difficult because of problems such as imperfect
information and administrative inertia. The second advantage of an emissions trading program is that it would ensure stable emission
reductions in the face of inflation and economic growth, while a carbon tax would not. Inflation erodes the real value of a tax. Therefore,
firms find it relatively more attractive, over time, to increase emissions and pay the tax. Economic growth increases the number of firms
willing to pay taxes in order to emit CO[2], thereby causing total emissions to increase. In contrast, inflation and economic growth do
not increase total emissions under an emissions trading program, because the total quantity of emission rights stays fixed. In the words of
Richard Stewart, an emissions trading program "will ensure that we run faster and faster to keep in place." Third, while both emissions
trading and pollution taxes lower the overall cost of reducing emissions, a tax would impose additional financial burdens on industry. It
would require firms to pay both the costs of reducing emissions and the tax liabilities for remaining emissions. Thus, a tax would result
in substantial transfer payments from industry and its customers to the government. Although in theory these transfer payments would
not be a net cost to society as a whole, in practice there would be some loss due to the transaction and administrative costs of the tax
scheme. The large transfer payments from the private sector to government entailed by a carbon tax program would also substantially
increase the cost of doing business. Since the cost of reducing CO[2] emissions is expected to be very high, the additional burden of
emission tax payments is likely to be strongly opposed by industry. Large transfer payments from industry to government are not
necessary under an emissions trading program in which regulators allocate emission rights to firms without charge. Fourth, a unilateral
U.S. carbon tax would adversely affect the international competitiveness of U.S. industries. Domestic manufacturers of products that are
fossil-fuel intensive would be put at a competitive disadvantage, because they would be forced to pay the carbon tax while foreign
manufacturers would not. It would also be impractical to try to levy an excise tax on imported good based on the estimated CO[2]
emissions that were produced during the manufacturing process. A CO[2] emissions trading program would not impose the same
magnitude of disadvantage on domestic producers because it would not require the large transfer payments that would result from a
carbon tax. Fifth, the United States has had some (albeit limited) experience in implementing emissions trading programs, but has had
almost no practical experience with pollution taxes. Thus, although EPA has already developed some of the expertise and administrative
machinery that will be necessary to implement an emissions trading program, it lacks the expertise and administrative systems necessary
to assess, collect, and enforce emissions taxes. Similarly, the staff of the congressional tax committees that would oversee such a tax
program have no experience or expertise in environmental matters. These bureaucratic realities suggest that the federal government may
be able to implement a CO[2] emissions trading program much more smoothly and efficiently than a carbon tax program. Finally, taxes
are politically unpopular. Estimates of the magnitude of a carbon tax needed to stabilize CO[2] emissions suggest that such a tax would
be very hefty. One recent estimate is that a carbon tax would have to be about $ 250 per ton to stabilize CO[2] emissions, which would
increase gasoline prices at the pump by about seventy-five cents per gallon. Such a large tax would probably be politically impossible to
enact in the near future.
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1. Permit scheme superior to carbon taxmore likely to generate a global agreement
Richard C. Levin, President, Yale University, Statement before Senate Committee on Environment and Public Works, CQ
Second, although there are good theoretical and practical arguments on both sides of the question, in the context of reaching international
agreement, a cap-and-trade scheme may have a decisive advantage over a carbon tax. Developing countries will strongly resist a uniform
global carbon tax, which they would perceive as placing upon them an unfair burden; yet different taxes across nations would distort
investment incentives. By contrast, agreement on a global cap-and-trade system could take account of a country's stage of development
by assigning more stringent reduction targets to developed countries and less stringent ones to developing countries. Regardless of the
equitable adjustments made in distributing national quotas, as long as allowances are tradable internationally, a uniform price for carbon
will result, creating a solution that would be both equitable among nations and efficient in the allocation of investment.
2. Emissions trading superioreasier to set a target

Inho Choi, Global Climate Change and the Use of Economic Approaches: The Ideal Design Features of Domestic Greenhouse Gas
Emissions Trading with an Analysis of the European Union's CO2 Emissions Trading Directive and the Climate Stewardship Act,
NATURAL RESOURCES JOURNAL v. 45, Fall 2005, p. 900.
Emissions trading has several advantages over a carbon tax. First, the emissions cap can be more easily established using such
benchmarks as the Kyoto Protocol's seven-percent reduction target or the UNFCCC's GHG emissions stabilization goal. Given that a
specific national commitment under international law is usually a precondition for domestic implementation of climate change
mitigation policy, "the certainty about the size of the emissions reductions" would make emissions trading preferable to the carbon tax
system. Different cost curves among various industrial sectors might produce political wrangling over applicable tax rates, even when
reliable cost figures are readily available.
3. Emissions trading superiorexperience, benefits or grandfathering

Furthermore, emissions trading has an additional advantage over a carbon tax: the grandfathering of CO2 emissions allowances. While it
can achieve the same result through tax ceilings or credits, rate adjustments, or rebates, a carbon tax with such features would become
too complex to administer or would create too many loopholes, compromising the tax's underlying environmental goals. Finally, CO2
emissions trading can build on the nation's prior experience with tradeable permit systems.
4. Carbon tax is far superior to tradingmore transparent

George F. Will, commentator, Cloaked in Rhetoric, TIMES OF TRENTON, 6308, p. A9.
If carbon emissions are the planetary menace that the political class suddenly says they are, why not a straightforward tax on fossil fuels
based on each fuel's carbon content? This would have none of the enormous administrative costs of the baroque cap-and-trade regime.
And a carbon tax would avoid the uncertainties inseparable from cap-and-trade's government allocation of emission permits sector by
sector, industry by industry. So a carbon tax would be a clear and candid incentive to adopt energy-saving and carbon-minimizing
technologies. That is the problem. A carbon tax would be too clear and candid for political comfort. It would clearly be what cap-andtrade deviously is, a tax, but one with a known cost. Therefore, taxpayers would demand a commensurate reduction of other taxes. Capand-trade - government auctioning permits for businesses to continue to do business - is a huge tax hidden in a bureaucratic labyrinth of
opaque permit transactions.
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1. Emissions trading ensures the most cost-effective means of cutting CO2 emissions
Jonathan Donehower, Analyzing Carbon Emissions Trading: A Potential Cost Efficient Mechanism to Reduce Carbon Emissions,
ENVIORNMENTAL LAW v. 38, Winter 2008, p. 188-190.
Emissions trading promises to take advantage of the market's efficiencies to lower the cost of reducing emissions for participants.
Emissions trading hopes to correct the current market that is "precise in its ability to account for capital goods, [but] imprecise in its
ability to account for natural and human resources because it assumed them to be limitless." As a result, the cost of goods and services
has not reflected environmental costs and the true value of using or destroying common goods. GHG emissions trading promises to force
participants to incorporate the economic cost of carbon emissions into the cost of production. "These market mechanisms increasingly
enable companies to calculate project returns and capital expenditures decisions with the price of carbon fully integrated." If the
emissions trading market functions properly, it will incorporate the cost of carbon and cost-efficiently allocate capital to reduction
projects. An emissions source with cheap reduction options can reduce emissions and sell their excess allowances to high-cost
compliance sources, resulting in more cost-efficient emissions reductions for both parties. Emissions trading is ideally suited as a
flexible mechanism to combat GHG emissions. As discussed earlier, GHG emissions have global consequences regardless of the source,
which allows for the "design [of] trading programs without geographic limits defined by localized environmental impacts." This creates
a larger market for reductions without raising local health concerns from environmental impacts. In addition, the measuring of GHG
emissions can be relatively inexpensive by using fuel consumption, rather than the expensive continuous emissions monitoring required
by some existing trading programs. Emissions trading has demonstrated the ability to significantly reduce costs. The U.S. Acid Rain
Program estimated cost savings at $ 20 billion, or a fifty-seven percent cost reduction below the estimated command-and-control
alternative. As a result, emissions trading is an important mechanism to cost-efficiently reduce global GHG emissions.
2. Carbon trading is the most cost-effective way of avoiding catastrophic climate change
ENVIORNMENTAL LAW v. 38, Winter 2008, p. 178.
Carbon emissions trading, one of the Kyoto Protocol's flexible mechanisms, presents a promising tool to limit global emissions of GHGs
that cause climate change. Questions still remain whether carbon markets provide a cost-efficient and environmentally effective method
for reducing GHG emissions. Ideally, emissions trading reduces the cost of meeting emissions obligations by placing a monetary value
on GHG emissions and using the flexibility of the market to allow participants to decide whether it is cheaper to reduce emissions or to
purchase excess allowances from others. Emissions trading holds the promise to correct a market failure that allows companies to avoid
incorporating global environmental costs in the cost of production. This Comment examines the status and effectiveness of the current
carbon markets and their ability to create flexible and cost efficient methods to reduce emissions. The Comment concludes that
emissions trading can provide an import cost-efficient mechanism to lower the cost of reducing global GHG emissions to levels that
would prevent catastrophic anthropogenic climate change.
3. Carbon trading will internalize costs, avoid crushing economic impacts of warming
ENVIORNMENTAL LAW v. 38, Winter 2008, p. 180-181.
Carbon emissions trading, one of the Kyoto Protocol's flexible mechanisms, presents a promising tool to limit global emissions of
greenhouse gases that cause climate change. Questions still remain whether carbon markets provide a cost-efficient and environmentally
effective method for reducing GHG emissions. Ideally, emissions trading reduces the cost of meeting emissions obligations by placing a
monetary value on GHG emissions and using the flexibility of the market to allow participants to decide whether it is cheaper to reduce
emissions or to purchase excess allowances from others. Emissions trading holds the promise to correct a market failure that allows
"companies [to be] rewarded financially for maximizing externalities in order to minimize costs." Currently, business decisions do not
incorporate the true external cost of climate change because there is no incorporated production cost for the environmental effects of
emitting GHG emissions into the commons. Sir Nicholas Stern, a former chief economist of the World Bank, recognizes this market
problem and estimates that if climate change goes unabated, the total cost of climate change could top $ 5.5 trillion, or twenty percent of
the world's economic output, approximately equal to the cost to the economy suffered during the Great Depression. In contrast, "an
investment of one percent [$ 350 billion] of total world economic output would suffice to avert the direst consequences of global
warming." Emissions trading promises to incorporate environmental externalities and to "enable capital markets to achieve their intended
purpose - to consistently allocate capital to its highest and best use for the good of the people and planet." If an emissions trading system
adequately limits the supply of emissions allowance through a sufficient cap to prevent anthropogenic climate change, a carbon market
will force participants to find cost-efficient ways to either reduce emissions or acquire reduction credits as cheaply as possible to meet
their obligation.
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4. Cap-and-trade is the most cost effective way to cut emissionsencourages innovation, proven by acid rain
program
Eileen Claussen, President, Pew Center on Global Climate Change, Testimony before Senate Environment and Public Works
Committee, CQ CONGRESSIONAL TESTIMONY, 111507, lexis.
Cap-and-trade is the most cost-effective way of reducing greenhouse gas emissions Senators, the bad news is that climate change poses
real risks to our nation's security, economy and environment, and that these risks will grow dramatically if we do not begin to reduce our
greenhouse gas emissions now. The good news is that the market- based mechanisms found in the America's Climate Security Act of
2007 will allow us to address this problem cost effectively and in a way that enhances U.S. competitiveness. Unlike most emissions this
committee deals with, greenhouse gas emissions are essentially fungible. Greenhouse gases mix quickly throughout the atmosphere,
which means that wherever you can reduce a ton of greenhouse gas emissions - whether from a car, a factory, or a power plant; whether
in Los Angeles, London, or Lagos - the benefit to the climate is the same. In most of our other environmental laws, Congress directs
EPA to dictate how much of a given pollutant a facility can emit or which pollution control technology to use. We do not have to take
that approach with greenhouse gas emissions. Instead, by using a cap-and-trade program, Congress can set the overall greenhouse gas
reduction goals and let the emitters decide for themselves how to achieve the environmental goals of the program at least cost. When we
used a market-driven approach in the acid rain program, it provided the best environmental result at the lowest overall cost to our
economy. This does not mean that achieving our climate security goals will be cost-free, just that the cost can be kept as low as possible
- and far less than the cost of not acting.
5. Cap-and-trade will spur innovation, decreasing compliance costs and generating revenue from carbon credit
auctions
David Hawkins, Director, Climate Center, Natural Resources Defense Council, Testimony before Senate Environment and Public Works
It bears highlighting that no economic model can fully anticipate the advances in technology likely to be spurred by a policy package
that caps and reduces emissions and uses allowances and performance standards to promote innovation. For example, prior to enactment
of the cap on SO2 emissions in the 1990 Clean Air Act amendments, EPA projected that the price of SO2 allowances would be $500$1000 per ton. In fact, prices have been far lower, generally in the range of $100 to $200 per ton until it became clear that emission
limits would be tightened further than originally enacted by Congress. To ensure the affordability of a global warming cap and trade bill
the legislation must be designed smartly. That means establishing a firm pollution cap that will spur innovation, allowing trading such
that emission reductions can be made at least-cost, and using the value of emission allowances in the public interest making it possible to
offset any increases in energy costs for low and middle-income consumers. A recent MIT analysis of the Lieberman-McCain Climate
Stewardship Act found that a family of four could receive in 2015 more than $3500 in revenue from the auction of allowances under this
legislation, increasing over the years of the program.
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1. Trading is an effective CO2 abatement techniqueare substantial efficiencies to be captured
Emissions trading or pollution taxes can work well in the context of global climate change. Sources of CO2 emissions are ubiquitous.
Because of significant cost variations, trading between both high- and low-cost sources presents a real opportunity to maximize
efficiency gains. Fortunately, there is no significant problem with monitoring carbon emissions because the carbon content of a fossil
fuel can be used as a proxy for expensive real-time monitoring. These and other factors clearly indicate that flexibility mechanisms
should be employed as a viable policy tool to achieve a carbon reduction goal in a cost-effective manner.
2. Trading allows market choice, minimizing abatement costs

Elizabeth Burleson, LLM, London School of Economics, Multilateral Climate change Mitigation, UNIVERSITY OF SAN
FRANCISCO LW REVIEW v. 41, Winter 2007, p. 389-390.
Emission trading allows players to choose the most cost effective approach, comparing investing in low carbon equipment, increasing
energy efficiency, or buying carbon credits from a source that has lower emission reduction costs. The global cost of carbon mitigation
can be minimized when emission trading facilitates reductions where they are least expensive to implement. Several countries have
already implemented emissions trading programs. The Clean Air Act's cap-and-trade system for sulfur dioxide mandated that power
generators cap and subsequently reduce their emissions. Electricity plants that reduced emissions beyond their required level could sell
credits to those entities that went over their cap. George H. W. Bush authorized the sulfur dioxide emissions trading system that has
substantially reduced acid rain. Building upon its unified regional response to acid rain, the Regional Greenhouse Gas Initiative
("RGGI") has been created by the following eastern states to address carbon emissions from power plants: Maine, New York, New
Hampshire, Vermont, Delaware, Connecticut, New Jersey, and Maryland. This regime allows for linkage with Kyoto Protocol credits
and other mandatory regimes. California's Global Warming Solutions Act also has the capacity to link to other carbon markets.
3. Cap-and-trade system utilizes power of the market to minimize costs

Fred Krupp, President, Environmental Defense, Testimony before Senate Environment and Public Works Committee, CQ
In addition to safeguarding the environment, the Act protects the economy in many ways. First, it uses the time-proven mechanism, capand-trade, that allows regulated entities access to the lowest cost emissions reductions possible. Cap-and-trade provides a whole range of
cost management mechanisms that allow companies a wide choice in managing their compliance with emissions limits. Companies can - make emissions reductions at their own facilities, -- purchase allowances from other facilities whose cost of reductions are even lower
(so much so that they can "over- comply" and sell their excess allowances to others), and -- optimize plant development schedules and
maintenance and can "bank" and "borrow" emissions allowances to fit into those schedules. As experts have written "enhanced
environmental performance can be attributed to the increased flexibility associated with emissions trading. Where emission reduction
requirements are phased in and firms can bank emission reductions - as was the case in the Lead Trading, Acid Rain, ABT, and
Northeast NOx Budget Programs - the achievement of the required emission reduction has been accelerated." 3 (See Attachment 1 for
more information on cap and trade programs.) Companies can also purchase offsets from American farmers. They can earn credits by
reducing international forest destruction. The ability to sell excess allowances creates an incentive for inventors and entrepreneurs to
develop and deploy new technologies. All of these processes work together to allow us to meet our challenge at the lowest possible cost.
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1. Cap-and-trades price signal ensures adoption of alternative energy technologies
Kevin Anton, President, Alcoa Materials Management, Testimony before Senate Environment and Public Works Committee,
Subcommittee on Private Sector and Consumer Solutions to Global Warming and Wildlife Protection, CQ CONGRESSIONAL
TESTIMONY, 102407, lexis.
A cap-and-trade approach will guarantee that emissions reductions targets are met while simultaneously generating a price signal that
stimulates investment and innovation in the technologies necessary to achieve our environmental goal. Unlike traditional command andcontrol regulations, under a cap-and-trade program, government sets the environmental goal and industry decides how best to achieve it - which is the right division of labor. And unlike a tax, a cap-and-trade program lets the market, not the government, set the price. The
Act also covers the six predominant human-generated greenhouse gases, rather then focusing solely on carbon dioxide. While most U.S.
emissions are in the form of carbon dioxide from the combustion of fossil fuels, the non-C02 gases are more potent in their global
warming potential than C02 and there are cost effective - and in some case cost saving - opportunities to reduce their emissions.
2. Trading will spur innovation and adoption of clean energy resources

The fact that carbon capture and sequestration are not yet commercially viable confirms the need for pursuing sustainable energy
development: promoting energy conservation and efficiency, and the development and commercial deployment of cleaner, more
efficient energy sources and technologies. Future climate change law will help to achieve these goals in a way that current U.S.
environmental and energy law have not. These goals are achievable because effective carbon control policy will raise fuel prices and,
thus, increase the economic value of energy efficiency and conservation. As a consequence, entry barriers to clean energy technologies
will be cleared and technological innovation will be spurred by the elimination of implicit subsidies for existing dirty sources. The key to
success is strong political leadership with the wisdom and courage to tell the truth to and persuade the American public about the need
for prompt action on climate change.
3. Cap will spur investment in alternative energy sources, solve now at lower cost than acting in the future
David Hawkins, Director, Climate Center, Natural Resources Defense Council, Testimony before Senate Environment and Public Works
As a result of these and other assumptions, the cost impacts predicted by CRA are much higher than EPA's or Duke University's
Nicholas School's recent modeling, which find that compliance with the emissions targets has only a small effect on GDP. Finally,
CRA's suggestion that delaying emission reductions would reduce costs ignores the primary driver of innovation. Entrepreneurs will
only invest in developing and deploying the low-emission technologies we need if a market for these innovations is established by
capping global warming pollution now. Delaying action will only delay progress in further reducing the costs of the many technology
options available today. When all is said and done, solving global warming is not only affordable, it is likely to be beneficial to the
economy as well as our environment and public health. But even if it costs several times as much as EPA's or Duke's estimates, it is still
a much better choice than gambling our future through inaction. (See attached "Economists' Statement on Climate Change") We have the
solutions - cleaner energy sources, new vehicle technologies and industrial processes and enhanced energy efficiency. What we lack is
the policy framework to push business investments in the right direction and to get these solutions in the hands of consumers. America's
Climate Security Act is a solid start on a policy framework that will trigger the necessary technological innovation in a manner that will
strengthen our economy and lower the risk of catastrophic climate disruption.
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4. Cap-and-trade key to competitivenesswill drive green innovation and technological development
Eileen Claussen, President, Pew Center on Global Climate Change, Testimony before Senate Environment and Public Works
A greenhouse gas cap-and-trade program will enhance U.S. competitiveness The America's Climate Security Act will enhance U.S.
competitiveness. Given what the peer-reviewed science tells us about climate change, we must move quickly from our current economy
to one in which our greenhouse gas footprint shrinks even as our standard of living increases. That will require a profound worldwide
technological revolution. The United States can and should be leading that revolution, and positioning itself to reap the economic
benefits associated with decreased dependence on foreign oil and increased export potential of low carbon technology. We currently are
not leading, however, and federal R&D subsidies alone will not change that. An appropriate price on greenhouse gas emissions, in
combination with "technology push" policies, will. Some have asserted a false dichotomy between the need for mandatory climate policy
on the one hand and support for climate-friendly technology on the other. In fact, a well- designed mandatory climate policy that
leverages the power of the market is essential for driving deployment of climate-friendly technology. When combined with subsidies for
specific technologies, it is the most cost-effective method of driving deployment. Government would have to spend roughly ten times the
amount in incentives alone in order to achieve the same environmental result as a price signal coupled with incentives. The America's
Climate Security Act wisely combines mandatory greenhouse gas constraints and technology subsidies. I would like to mention three
other important issues before I conclude: how to deal with transportation, the use of allowance allocation as a tool, and the need for cost
certainty and reliability.
5. Cap and trade system will spur a green tech/economy boom

Bob Keefe, journalist, Carbon Spawns a New Market, ATLANTA JOURNAL-CONSTITUTION, 3208, p. 1F.
Economic predictions If Europe is any indication, such a system in the United States would create a huge new industry for carbon
monitoring, trading and consulting. It could help spur more energy innovation and boost the potential of the growing number of "clean
tech" companies. In an indication of just how big the pollution business could become, more than 1,400 attendees converged here last
week for a first-of-its-kind Carbon Forum America sponsored by Derwent's organization. A separate event drew venture capitalists and
clean tech companies. "A cap-and-trade system will not only significantly reduce our nation's carbon footprint, it also will generate
tremendous economic activity [and create] a whole new green economy," U.S. Sen. Dianne Feinstein (D-Calif.) said in a videotaped
statement opening the forum.
6. Cap-and-trade spurs new energy investments that will boost the economy
Dr. Jonathan Pershing, Director, Climate, Energy and Pollution Program, World Resources Institute, Testimony before Senate
Committee on Environment and Public Works, CQ CONGRESSIONAL TESTIMONY, 11807, lexis.
S.2191 sends a price signal to the market. By capping GHG emissions, it implicitly establishes a value on such emissions, and pushes
investors to design and implement policies to reduce them. Economic and technology analysis suggests that the range of options to
reduce emissions at modest costs is large. A study being undertaken by McKinsey suggests that a wide variety of technologies, with
more than 4 billion tons of abatement potential, would penetrate the market at costs below $50/ton of carbon (see figure 1 below).
However, even such a figure is misleading: a carbon price of $50/ton does not imply a loss to the economy of this amount. Rather, it
implies a shift - from systems and operations that are GHG intensive to those that are not. In turn, this suggests we are likely to see major
investment in new energy and transport technologies that could continue to power the U.S. economy.
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-
Access to U.S.. carbon market is a powerful lever to be used to cut global emissions: (a) encourage early
adoption; (b) encourage end of deforestation; (c) use to push caps in other nations
Jennifer Haverkamp, Senior Counsel, Environmental Defense Fund, Testimony before Senate Finance Committee, CQ
(2) Use the power of access to the U.S. carbon market as a "carrot" to encourage other nations to cap and cut emissions. Our carbon
market is likely to be the largest in the world. Other nations' interest in gaining access to our carbon market -- for carbon finance, and to
sell us reductions - will give Congress leverage, just as in any other market access negotiation. Here are three ways Congress could use
the power of carbon market access to create incentives that encourage other nations - even recalcitrant ones -- to cap and cut emissions:
a. Congress could offer emission "premiums" for countries that sign up to emissions caps early. Congress has the ability to set terms for
US carbon market access, and make access conditional on the adoption of emissions caps. The Lieberman- Warner America's Climate
Security Act envisions this already, by requiring that foreign tons used for compliance with the U.S. emissions cap come from capped
nations that adopt a program of similar stringency to our own. This language allows for some latitude in interpretation; consistent with
the objective of stabilizing the climate at safe levels, Congress could offer, or could direct the Executive Branch to offer, such countries
the opportunity to choose different base years, or different cap levels, for their cap-and-trade systems. A precedent for this approach can
be seen in the Kyoto Protocol's carbon market, which holds most emitters to a 1990 base year for their cap and trade programs, but
which allows nations like Hungary and Poland, that were undergoing the transition to a market economy, the opportunity to select earlier
base years, when their emissions were higher. Because the atmospheric space for such "premiums" is limited, Congress could establish,
or direct the Executive Branch to establish, a "first-come, first- served" approach to recognition of foreign cap-and-trade programs,
whereby the U.S., when allowing its carbon market to link to nations with comparable programs, would afford a degree of flexibility to
the programs that are adopted soonest in major developing nations. b. Congress should offer tropical forest nations opportunities to
participate in a U.S. cap and trade market. Well-designed carbon markets should offer developing countries incentives to reduce tropical
deforestation as part of their contribution to lowering global GHG emissions. In our world today, the destruction of forests - principally
in the tropics - emits massive amounts of carbon dioxide: approximately 20% of global greenhouse gas emissions, or roughly as much
each year as all the CO2 emitted by all the fossil energy consumed in the United States. When forest carbon emissions are included, the
third and fourth largest emitters of GHGs in the world are Indonesia (#3) and Brazil (#4). We are encouraged that the Bali Action Plan,
by including consideration of avoided deforestation and market mechanisms as a means of reducing emissions, creates the possibility
that the next climate agreement will correct the Kyoto Protocol's serious omission in this regard. However, there is much to help reduce
deforestation that can and should be done now as part of the U.S. cap and trade regime. Were Congress to structure the U.S. carbon
market to compensate developing countries for emission reductions that lower their rate of deforestation nation-wide, below a historical
baseline, Congress could strengthen those nations' climate and biodiversity protection efforts and create a model for engaging developing
countries broadly. Doing so can also make good economic sense: A range of estimates indicate that the cost of forest protection in some
parts of the world is far less than the cost per ton of more expensive means of reducing CO2 emissions given today's technologies. 6
Consequently, opening America's carbon market to these tons could significantly reduce U.S. companies' compliance costs in the near
term, and provide an important bridge strategy while technology innovations are developing that will drive down the costs of CO2
control in the energy sector in the future. On the other hand, if the world waits a decade or two to create powerful incentives for
compensating those who protect tropical forests, the forests - and the approximately 300 billion tons of carbon they hold - will already be
gone. We believe that carbon market compensation for tropical countries that stop or reduce deforestation is a critical component of a
U.S. cap and trade regime. We welcome Lieberman-Warner's provisions allocating 2.5% of the total U.S. emissions allowances for
international forest carbon activities, though we believe the proportion should be higher. We would also like to see the provision that
allows covered facilities to meet up to 15% of their compliance obligations with international allowances be amended to include
international forest carbon activities. As a general matter, however, quality should be more important than quantity in determining
market access. Congress should also direct the Executive Branch, working with tropical forest nations, to assist developing countries in
establishing the infrastructure and institutions needed to transparently measure and monitor emissions from deforestation; to implement
and enforce forest conservation measures; and to ensure that market- based compensation redounds to the benefit of local forest
communities. c. To move nations toward national GHG programs, Congress could restrict access to our carbon market for credits earned
in nations that don't cap their emissions. While Kyoto caps industrialized nations' emissions, it allows developing countries to earn
emission credits from individual projects, even if those countries haven't capped emissions, and to sell those credits to entities in
developed countries to use in complying with their caps. These are known as CDM projects, from Kyoto's "Clean Development
Mechanism." The CDM has given participating countries valuable experience, on a project-by- project basis, with reducing GHG
emissions. But overall, those projects don't reduce emissions nation-wide, and they don't contribute to global emission reductions. That
is because under the CDM, an emission reduction earned in a developing country can be credited to an industrialized country's emissions
<<continued, no text removed>>
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<<continued, no text removed>>
account, but no corresponding debit is made from the developing nation's emissions account, since its emissions are uncapped. The net
result of the CDM transaction is to keep emissions at the same levels they would have been had emissions continued to increase
unabated in the developing country, even while the industrialized country is still able to use CDM credits to meet its target. But the
science is clear: The climate can only be stabilized if there is effective emissions abatement in both industrialized and developing
countries. Consequently, to achieve the global emissions reductions needed, all major emitting nations should eventually graduate from
CDM projects toward national GHG management programs. Let me stress "eventually" - we recognize the value these projects currently
represent to the countries that have them. We understand that Lieberman-Warner as reported out of the EPW committee does not
specifically include CDM credits, and states that, to be allowable, foreign credits must come from a capped country. If Congress decides
to open the U.S. carbon market to credits earned in major emitting uncapped nations, it should do so in a way that contributes to
reducing overall global emissions. Congress could bridge this gap by, for example, imposing progressively tighter limits on major
emitting countries' credit sales until such time as they cap their total emissions. It could apply a mandatory "multiplier" to project-based
carbon credits from uncapped nations. Under the multiplier approach, Congress would require U.S. emitters to tender such credits on a
1.1:1, or 1.5:1, or even 2:1 basis for compliance with their domestic emissions caps. The additional tons of credits generated by the
multiplier could then be permanently retired from the system, thereby ensuring that such projects deliver globally real reductions.
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1. We should eliminate energy subsidiesfree markets address our energy needs best
Nicolas Loris, policy analyst, Heritage Foundation, Power Down the Subsidies to Energy Producers, WASHINGTON TIMES, 83
11, www.heritage.org/research/commentary/2011/08/power-down-the-subsidies-to-energy-producers, accessed 1-11-16.
Reducing government control of the energy economy decreases the incentive to use the political process for gain. The best way to do
that is to 1) stop creating new energy subsidies; 2) start removing those already in place; and 3) use the money saved by repealing the
special-interest subsidies to implement a broad tax cut. Doing so would tremendously benefit Americans as taxpayers and energy
consumers. Americans have no addiction to any particular energy source. Theyll buy whatever delivers a good value: Reliable energy at
an affordable price. The real problem is the energy sectors addiction to subsidies. Central planning didnt work for the Soviets, and its
not working for the U.S. energy market. Eliminating subsidies for all energy sources would force all segments of the energy industry to
develop the innovations and efficiencies needed to earn the business of American energy consumers.
2. We should eliminate energy subsidiesthey stifle innovation and foster path dependence
Reducing government control of the energy economy decreases the incentive to use the political process for gain. The best way to do
that is to 1) stop creating new energy subsidies; 2) start removing those already in place; and 3) use the money saved by repealing Their
growing dependence on federal handouts is the real cause of Americas energy crisis. Energy subsidies have needlessly wasted taxpayer
dollars, retarded commercialization of new technologies and failed to reduce our reliance on foreign energy sources. Washington would
do well to end all energy subsidies. Energy subsidies come in numerous forms ranging from direct expenditures to targeted tax breaks,
from production mandates to loan guarantees. Basically, any public policy that favors the production or consumption of one type of
energy over another can be considered a subsidy. None of them come cheap. According to the Energy Information Agency, the federal
government gave the energy industry $8.2 billion in subsidies and financial aid in 1999. This figure more than doubled to $17.9 billion
in 2007 and more than doubled again to $37.2 billion last year. But the damage subsidies inflict on our economy extends well beyond
direct costs. A special endorsement from the government artificially props up that technology. This reduces the incentive for the
producer to become cost-competitive, stifles innovation and encourages government dependence.
3. Energy is readily regulated by marketsis no need for government intervention

Jerry Taylor and Peter Van Doren, Cato Institute, Chapter 6: Myth FivePrice Signals are Insufficient to Induce Efficient Energy
Investments, ENERGY AND AMERICAN SOCIETY: THIRTEEN MYTHS, ed. B.K. Sovacool & M.A. Brown, 2007, pp. 125-144, p.
137-138.
Energy is like any other commodity in the marketplace, and there is little reason to believe that energy decisions cannot be directed
efficiently by market price signals. The proper corrective for price distortions is not to give up reliance on prices but to eliminate the
policies that cause the distortions. That implies internalizing externalities, to the extent possible, and eliminating government
interventions that send incorrect signals to producers and consumers about energy supply and demand. Happily, concerns that energy
prices are substantially wrong in the United States today are overblown. Energy prices are reasonable reflections of total producer
costs and consumer demand. There are certainly exceptions to this rule. For example, most renewable energy and nuclear power
facilities would disappear without government support (Taylor and Van Doren, 2002 and 2001; Heyes, 2002-2003). And there are easy
correctives for policy makers to employ should government decide to end those price distortions. Most government interventions in
energy markets, however, are undertaken for distributional rather than efficiency concerns. Neither firms nor consumers like energy
markets and politicians are willing to accommodate that dislike. While this chapter has not addressed the case for intervention on equity
grounds, it argues that efficiency-based arguments for intervention which are often employed as rationales for intervention actually
driven primarily by equity concerns have little intellectual support. Our advice to those concerned with equity is to address those
concerns outside of the context of energy markets and in a manner that distorts price information the least.
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4. Energy markets function quite well, obviating the need for government intervention
Jerry Taylor and Peter Van Doren, Cato Institute, Chapter 6: Myth FivePrice Signals are Insufficient to Induce Efficient Energy
Investments, ENERGY AND AMERICAN SOCIETY: THIRTEEN MYTHS, ed. B.K. Sovacool & M.A. Brown, 2007, pp. 125-144, p.
126.
Those observations have led many to conclude that energy price signals are not accurate reflections of true energy costs and will not
produce efficient energy production and consumption decisions. Various remedies have been suggested, ranging from corrective action
to get prices right to more ambitious intervention to directly control production and consumption decisions. We believe that the
contention that energy markets are riddled with market failures, however, is a myth. While energy markets dont work with textbook
efficiency (in fact, few do), energy markets do not exhibit special problems that require government attention. Energy prices are
reasonably accurate reflections of true energy costs and the complaints lodged against them are greatly overstated. In those settings in
which prices are not accurate reflections of total costs (primarily in electricity and retail gasoline markets), the best remedy is to
eliminate government policies that distort prices rather than adopt countervailing interventions to offset the distortions caused by earlier
policies.
5. Government intervention only distorts markets, ensures that investment capital is wasted
Subsidies also allow government to steer the flow of private-sector investments - another destructive feature. Supporters call this
investment for job creation. But subsidies create jobs only in the politically-preferred industries. Economists are quick to point out that
theres no free lunch. When government gives a tax credit to banana producers, more labor and capital shift toward banana production.
But the money underwriting the tax credit is extracted from other economic activities, like strawberry or grape production. Theres no
net job creation. Similarly, the government can spend money to subsidize windmills, solar panels and natural gas vehicles, but those
subsidies drain labor, capital and materials that could be used more efficiently elsewhere.
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Carbon Tax Undesirable: AlternativesGrowth Strategy

1. Growth is key to innovationany policy that hurts the economy will undermine emergence of new energy
technologies
Kevin Book, Senior Vice President, Energy Policy, Oil and Alternative Energy, FBR Capital Markets Corp., Testimony before Senate
Inventions born of necessity may be ingenious, but they are likely to be undercapitalized. By contrast, innovation and profligacy often
live in the same zip code, if not necessarily under the same roof. New technologies to address global climate change are going to require
more investment dollars, not less. Stable economies encourage wealthy enterprises to invest in research and development towards new
transformational technologies, as well as evolutionary improvements to existing processes. This may explain past U.S. leadership in
energy and environmental technologies: not just because laws established new pollution controls, but also because, once rules were in
place, the nation's rare, if not unique, combination of efficient markets, open society and economic prowess enabled new pollution
control technologies to emerge from corporate laboratories and basement inventors alike. It is possible that plain old Yankee ingenuity
might really be a lucky accident, but I believe it comes from a synergy among related and supporting industries that form what Harvard
business scholar Michael Porter would call our "national advantage". This means that policies that raise the operating costs of industrial
innovators enough to cause a recession could deprive the U.S. and the world of emissions control technologies made possible, ironically,
by the same wealth and stability that inure energy end-users to the price signals that encourage conservation.
2. Tech is the best way to solve, thrives in a pro-growth economy

Technology development and deployment offers the most efficient and effective way to reduce GHG emissions and a strong economy
tends to pull through capital investment faster. There are only two ways to reduce CO2 emissions from fossil fuel use - use less fossil
fuel or develop technologies to use energy more efficiently to capture emissions or to substitute for fossil energy. There is an abundance
of economic literature demonstrating the relationship between energy use and economic growth, as well as the negative impacts of
curtailing energy use. Over the long-term, new technologies offer the most promise for affecting GHG emission rates and atmospheric
concentration levels.
3. Growth decreases emissionsempirically cuts energy intensity, U.S. experience proves

Many policymakers overlook the positive impact that economic growth can have on GHG emission reductions. For example, in 2006,
while the U.S. economy grew at 3.3 percent, CO2 emissions fell to 5,877 MMTCO2, down from 5,955 MMTCO2 in 2005, a 1.3 percent
decrease. Overall energy use only declined by 0.9 percent, indicating the U.S economy is becoming less carbon intensive even without
mandatory emission caps or carbon taxes. Internationally, the U.S. compares well in terms of reducing its energy intensity (the amount
of energy used to produce a dollar of output). The U.S., with its voluntary approach to emission reductions, has cut its energy intensity
by 20 percent over the 1992-2004 period compared to only 11.5 percent in the EU with its mandatory approach (see Figure 6). Strong
U.S. economic growth, which averaged over 3 percent per year from 1992 to 2005 compared to about 1 percent in the EU, is responsible
for the U.S.'s more rapid reduction in energy intensity in recent years.
4. Wealth allows us to adapt to virtually any effect of climate change

Indur M. Goklany, prominent researcher, What to Do About Climate Change, POLICY ANALYSIS n. 609, Cato Institute, 2508,
http://cato.org/pubs/pas/html/pa-609/pa-609index.html, accessed 1-1-16.
Economic growth broadly increases human well-being by increasing wealth, technological development, and human capital. These
factors enable society to address virtually any kind of adversity, whether it is related to climate or not, while specifically increasing
societys capacity to reduce climate change damages through either adaptation or mitigation. Many determinants of human well-being
hunger, malnutrition, mortality rates, life expectancy, the level of education, and spending on health care and on research and
developmentimprove along with the level of economic development, as measured by GDP per capita.
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Carbon Tax Undesirable: AlternativesGrowth Strategy [contd]

5. Wealth improves environmental quality, effect becomes stronger over time
Indur M. Goklany, prominent researcher, What to Do About Climate Change, POLICY ANALYSIS n. 609, Cato Institute, 2508,
http://cato.org/pubs/pas/html/pa-609/pa-609index.html, accessed 1-1-16.
Increasing wealth also improves some, though not necessarily all, indicators of environmental well-being. Wealthier nations have higher
cereal yield (an important determinant of cropland, which is inversely related to habitat conversion) and greater access to safe water and
sanitation. They also have lower birth rates. Notably, access to safe water and access to sanitation double as indicators of both human
and environmental well-being, as does crop yield, since higher yield not only means more food and lower hunger, it also lowers pressure
on habitat. Cross country data also indicate that for a fixed level of economic development, these indicators of human and environmental
wellbeing (e.g., malnutrition, mortality rates, life expectancy, access to safe water, crop yields, and so forth) improve with time (because
technology almost inevitably improves with time). Similarly one should expect, all else being equal, that societys ability to cope with
any adversity, including climate change, should also increase with the passage of time. Thus, over time, the combination of economic
and technological development should increase societys adaptive capacity which, barring inadvertent maladaptation, ought to reduce the
future impacts of climate change.
6. Carbon taxes impoverish us nowwe are better off investing in the present to produce a more prosperous
future
Swapping income today for greater income in the future is investment. The logic underpinning a carbon tax is the same. Lower GDP
today will provide even greater benefits in the future. Because there are many investment opportunities that can swap current income for
even greater future benefits it is necessary to compare alternative investments to investments in moderating global warming. In the
jargon of Econ 101, what is the opportunity cost of such an investmentwhat is the alternative investment of the same magnitude that
would provide the greatest alternative future benefit? Stated another way, the tradeoff is this: Instead of forcing the current generation to
invest in climate policy, they could be forced to invest in infrastructure, machinery, tools, factories or anything else that would lead to
greater production (and therefore consumption) capacity in the future. It would not make sense to invest for future generations at three
percent when, instead, they could reap the reward of a seven percent return. Discounting is the tool used to make the comparisons and
the correct rate is critical. Office of Management and Budget guidance stipulates that cost-benefit analysis should use discount rates of
three and seven percent. The IWGs TSD used 2.5 percent, 3 percent, and 5 percent discount rates but neglected to report SCC values
based on 7 percent. The IWG settled on three percent as the most reasonable discount rate and those are the values that have been used in
regulatory rule-making. Comparing the SCC values in the DICE model for the year 2020, Heritage found the value dropped nearly 85
percent when the 7 percent discount rate was used. In the FUND model the SCC drops more than 100 percent and actually goes negative
when the 7 percent discount rate is used. Following the logic of a carbon tax implies that CO2 emissions should be subsidized when the
SCC is negative.
7. A wealth / adaptation strategy is the best way to deal with climate change
Institute for Energy Research (IER), Carbon Taxes: Reducing Economic GrowthAchieving No Environmental Improvement, 3
1109, http://instituteforenergyresearch.org/?s=%22carbon%20taxes%22&sort=date, accessed 1-1-16.
13. If we are truly concerned about reducing carbon dioxide emissions, the best path forward is increasing humankinds ability to adapt.
Rich countries and societies can adapt more easily to changed circumstances than poor countries. Environmental improvements are more
likely to be realized in prosperous societies than in poorer ones. Carbon taxes and cap and trade reduce societys aggregate wealth,
which make environmental improvements more difficult to achieve.
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Carbon Tax Undesirable: AlternativesInnovation / Tech Strategy

1. We should focus on energy innovations, not carbon taxes
Alex Trembeth, Policy Analyst, Breakthrough Institute and Matthew Stepp, Senior Policy Analyst, Information Technology and
Innovation Foundation, A Climate Policy that Would Actually Work, THE HILL, 101113, http://thehill.com/blogs/congressblog/energy-a-environment/327837-a-climate-policy-that-america-could-live-with, accessed 1-5-16.
This gets to the second major problem with the carbon tax. The only way to get to dramatic cuts in global emissions is by developing
significantly cheaper and better clean energy technologies. Current clean energy alternatives cost significantly more than conventional
energy. Expecting consumers and businesses, especially in poor developing nations, to pay a large price premium for clean energy is
wishful thinking. The only path to cheap and reliable clean energy is innovation: better batteries, better solar cells, better biofuels, better
nuclear reactors, etc. Unfortunately, few economists focus on innovation and to the extent they do they see it as manna from heaven,
something that just happens. To the extent a carbon tax induces innovation it is through the magic of the market: higher prices provide an
incentive for entrepreneurs to develop a better energy mousetrap.
2. Public support for research is more likely to spur innovation than are higher energy costs
For policymakers, this means fully funding clean energy research budgets and strategically supporting proof-of-concept technology
demonstrations and early commercialization. To be clear, a carbon tax can make this easier, especially if some of the revenues are
devoted to a smart and effective clean energy innovation system. But to believe that modest price signals in the United States alone will
transform the worlds energy system is an illusion. As such its time to overcome climate policy group-think and embrace a robust clean
energy innovation policy.
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Carbon Tax Undesirable: AlternativesSubsidies

-
We should support public research and use tax credits / subsidies to spur the development of renewables
Steven Cohen, Executive Director, Earth Institute, Columbia University, A Carbon Tax Is Not Feasible or Practical, ENERGY
COLLECTIVE, 61015, www.theenergycollective.com/stevenacohen/2237621/carbon-tax-not-feasible-or-practical, accessed 1-916.
Carbon tax advocates are correct when they assert that tax policy can have a massive impact on behavior, but I think they are
approaching the issue backwards. After World War II we wanted to give the average person a greater stake in society and public policy
promoted home ownership. Tax policy helped transform America from a nation of renters to a nation of homeowners, but we didn't do it
by taxing rent. We did it by making property tax and mortgage interest tax deductible. We also learned how to insure mortgages. In
effect we lowered the price of ownership. In my view, the most practical and equitable way to change energy consumption habits is to
lower the price of renewable energy and energy efficiency. We should do it directly. It starts with basic research: government must fund
national labs and university-based scientists to advance renewable energy, energy efficiency and energy storage technologies. We can
then use tax policy to encourage the rapid commercialization of these technologies. Companies should be encouraged to take risks to get
into the business through reduced corporate taxes. Finally, tax policy can be used to encourage consumers to adopt these technologies by
lowering their price through tax credits and deductions. When wind and solar power receive favorable tax treatment, their utilization
rises, and when these short-term tax policies expire, their utilization declines. Tax expenditures work as well as tax increases and they
have the benefit of being politically attractive.
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Carbon Tax Undesirable: Deforestation

-
Carbon taxes risk increased deforestation

Unfortunately, the carbon tax will increase the already great pressure on the world's forests. As the fossil sources of fuel - coal,
petroleum, and natural gas - are subject to the carbon tax, the temptation and pressure to cut wood for fuel will increase. This pressure
will further increase because building materials will be subject to the carbon tax based on their content - if made of plastic or other
carbon-based materials - or on the carbon released in their production - if made of steel or concrete - making wood structures
comparatively more attractive. Extra emphasis will be required on the car-rots and sticks that help to preserve the world's forests.
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Carbon Tax Undesirable: EconomyGeneral

1. Carbon taxes cut overall GDP regardless of their size
13, p. 22.
GDP is an economic measure of the entire economy. The components of GDP are consumption, investment, government spending and
net exports. Since the level of Federal government expenditures is assumed to remain constant, the changes in GDP are driven by
changes in consumption, investment, and net exports. Figure 12 shows the estimated changes in GDP and its components in the two
carbon tax cases. GDP declines by approximately 0.5% per year for the $20 Tax Case, while the GDP reduction for the 80% Reduction
Tax Case increases from 0.4% in 2013 to nearly 4% by 2053. Both consumption and investment decline as well.
2. Carbon taxes would either hurt the economy or the pooroffset payments magnify the negative economic
effects
Oren Cass, Senior Fellow, Manhattan Institute, The Carbon Tax Charade, CITY JOURNAL, 6815, www.cityjournal.org/2015/eon0608oc.html, accessed 1-5-16.
A rebate could offset this regressive effect, but sending a monthly check to every American has problems of its own (not least of them
the de facto establishment of a guaranteed income). Unfortunately, analyses also consistently show that the economic drag of a new
carbon tax could be counteracted only if the revenues from that tax are used to reduce corporate income-tax rates. Take your pick: a
carbon tax that hurts the poor or a carbon tax that slows economic growth. Most likely well get a carbon tax that does a little bit of both.
3. A big carbon tax would cause economic devastation

6. A carbon tax set at a wrong level will cause great economic harm. Even the proponents of carbon taxes, such as Yale University
Professor William Nordaus, find that once there is deviation from worldwide participation, the costs of achieving environmental global
improvements dramatically rise. Nordhaus economic model shows that an overly ambitious and/or inefficiently structured policy can
swamp the potential benefits of a perfectly calibrated and efficiently targeted plan. For example, Nordhaus optimal plan yields net
benefits of $3 trillion ($5 trillion in reduced climatic damages and $2 trillion in abatement costs). Yet, other popular proposals have
abatement costs that exceed their benefits. The worst is former Vice President Al Gores 2007 proposal to reduce carbon dioxide
emissions 90 percent by 2050. Nordhaus model estimates this plan would make the world more than $21 trillion poorer than if there
were no controls on carbon dioxide.
4. Carbon taxes disincentivize economic productionhurt the economy

Kenneth P. Green, staff, Why a Carbon Tax Is Still a Bad Idea, AEIDEAS, American Enterprise Institute, 82812,
www.aei.org/publication/why-a-carbon-tax-is-still-a-bad-idea/, accessed 1-5-16.
So let us, once again, review why a carbon tax is a bad idea: 1) Taxes on carbon are not simply taxes on consumption, theyre a tax on
production as well, since energy is a primary input to production (and is a growing share because of increasing automation). Taxing both
production and consumption seems like a poor way to stimulate your economy, reduce your costs of production, or make your exports
more competitive.
5. A carbon tax would devastate the U.S.. and world economies

Andrew P. Morriss, Professor, Law, University of Illinois, Gore Plan Would Shatter Economy, AUGUSTA CHRONICLE, 423
07, p. A5.
* Replacing payroll taxes with carbon taxes: Let's pretend that Congress would actually eliminate payroll taxes when it enacted a carbon
tax, instead of simply adding the carbon tax. Carbon taxes are a bad idea, first, because everything we consume requires energy to make
and transport and, second, because non-carbon-emitting forms of energy are not currently capable of replacing more than a tiny fraction
of our energy needs. A carbon tax is effectively a tax on everything. Such a tax would be devastating to the U.S. and world economy.
And a carbon tax would fall more heavily on the poor than on the rich because the poor spend a higher proportion of their incomes on
energy-related products. Taxing the poor more than the rich is simply wrong.
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Carbon Tax Undesirable: EconomyGeneral [contd]

6. A big carbon tax would be a substantial drag on the U.S. economy
13, p. 3-4.
Figure 2 shows the net effects of the two carbon tax cases on the U.S. economy as measured by GDP and U.S. household consumption.
(All dollar values in this report are in 2012 dollars.) Under the $20 Tax Case, GDP would be reduced from the Baseline levels by about
0.4% ($60 billion) in 2013 and by about 0.6% ($230 billion) in 2053. The negative impacts of the 80% Reduction Tax Case on GDP are
substantially greater in the later time periods, reaching 3.6% (almost $1.4 trillion) by 2053. Under the $20 Tax Case, average household
consumption would be reduced by about $340 in 2033 and by about $440 in 2053, with an average present value reduction over the
period from 2013 to 2053 of $310 per household. Under the 80% Reduction Tax Case, the average household consumption declines by
about $860 in 2033 and by almost $2,700 in 2053, with an average present value reduction of $920 over the entire period. These results
indicate that the net aggregate effects of the two carbon tax cases on the U.S. economy and on U.S. household consumption would be
negative. In other words, when considered at an aggregate level, the negative economic effects of both carbon tax cases outweigh their
positive economic effects, which include estimates of the gains from using net carbon tax revenues to reduce both the Federal debt and
Federal PIT rates. Our analysis of the economy-wide impacts of the policy indicates that although the net carbon tax revenues are
positive in all years, their fiscal benefits to the economy are not large enough to outweigh the direct costs that the carbon tax imposes on
the economy. We also find that the higher carbon tax case results in larger net negative aggregate impacts.
7. Taxes big enough to cut emissions will hurt the economy

Philip Cross, former Chief Economic Analyst, Statistics Canada, The Carbon Tax Illogic, FINANCIAL POST, 11315,
http://business.financialpost.com/fp-comment/the-carbon-tax-illogic, accessed 1-8-16.
Momentum quickly has been building for a carbon tax, fueled by the recent drop in gas prices which some view as a smokescreen behind
which governments can increase fuel taxes that wont be noticed until world oil prices rebound or motorists venture into another
jurisdiction. Economists are mesmerized by the rationality of taxing the negative externality of carbon emissions while lowering income
taxes (which should increase the labour supply) and the seductive appeal that this can improve the environment while encouraging
economic growth. Who could resist such win-win solutions? Before getting on the carbon tax bandwagon, which already has dropped
the pretense of revenue-neutral income tax cuts, it is worth remembering a few important points. First, carbon taxes need to be hefty
(damaging as bluntly stated by the University of Colorado economist Keith Maskus at a recent conference) to be effective, especially
when energy prices are plummeting. Minor tinkering wont have much impact, but high taxes will produce negative net overall benefits.
8. Carbon taxes will impose substantial costs throughout the economy

Marshall Institute, 2013, p. 24.
Making energy more expensive and the economy less efficient will undermine economic performance and job creation. A carbon tax
does that directly by increasing the cost of carbon-intensive fuels or indirectly by increasing the use of relatively more expensive forms
of energy as consumers shift from fossil fuels to alternatives in response to the tax. Costs could be considerable, especially if
governments adopt extreme measures. As Robert Murphy observes, computer runs by William Nordhaus, creator of the DICE model,
indicate that if CO2 limits were capped at 1.5 times their pre-industrial level, then the loss of world economic output would be $27
trillion. (Nordhaus offset this with an estimated $13 trillion in benefits from CO2 reduction.) As Murphy says, If the tax is set too high .
. . Nordhauss results demonstrate that the cure can be much worse than the disease. A Congressional Budget Office (CBO) study of
Waxman-Markey in 2009 concluded that the bill would cause U.S. GDP to be between 1.1 percent and 3.4 percent less in 2050 than it
would be without the law. CBO did not regard the reductions as serious, because it also calculated an average annual growth of 2.4
percent. CBOs analysis suffers from the same defect as the EIA estimate mentioned earlier the lack of specifics about sources of
energy. CBO is estimating GDP ranges almost forty years from now, to the tenth of a percentage point, without knowing the underlying
assumptions about the technology in use or how the economy may change by that time. The size and extent of the Internet/e-commerce
sector was inconceivable in the early 1970s; no one can predict with certainty what new industries may evolve in the upcoming four
decades. Quades caution about the interaction of best guesses is appropriate, but such analyses are not even best guesses; they are based
on the hypothesis of assume an energy technology fairy. The real lesson to be drawn is that a carbon tax would impact the economy in
many ways, leading to an uncertain result, but one which is unlikely to be positive. CBOs numbers may be dubious, but its list of
incentive effects from Waxman-Markey is worth attention. (In theory, cap-and-trade is more restrictive than a carbon tax, and an
analysis of its economic impact is not fully transferrable. However, the incentive effects are similar. Also, if a carbon tax program is
implemented with a specific reduction target in viewsuch as the 80 percent reduction target in Sanders-Boxerthen the distinctions
would become slight.)
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Carbon Tax Undesirable: EconomyGeneral [contd]

9. Tax constraints on carbon will only increase abatement costswill run into the trillions
Robert P. Murphy, economist, Institute for Energy Research, Rolling the DICE: Nordhaus Dubious Case for a Carbon Tax, 608,
www.instituteforenergyresearch.org/wp-content/uploads/2008/06/2008-06_rolling_the_dice_murphy.pdf, accessed 1-1-16.
The lesson from Table 5 is clear: Arbitrary constraints on carbon emissions can lead to unnecessary abatement costs, even from the point
of view of achieving a desired climate change objective. To repeat, in the DICE model, imposing a cap of 420 ppm costs more (in terms
of forfeited production) than limiting temperature increases to 1.5C, and the former constraint leads to more global warming. Thus, it is
a poor policy even if we believe that mitigating climate change possesses its own intrinsic value, besides the avoided economic impact
on humans. Unfortunately, many of the politically popular proposals in this arena are of just this form. Not only do they fail to match
increments in avoided climate change with the corresponding opportunity costs in terms of foregone emissions, but these proposals
typically fail to achieve their aggressive environmental objectives in the least costly manner. (In other words, even if we are going to buy
more environmental benefits than we ought to, we should still shop for the best price.) Recall that the incredibly costly proposals laid out
in Table 4 above were not interesting thought experiments invented by Nordhaus. On the contrary, these were inspired by actual
proposals being seriously discussed by policymakers, including the Stern Review and Gore proposals, with their net costs of more than
$14 and $21 trillion, respectively.
10. Carbon taxes would hit the entire energy sector

1. Carbon taxes are taxes on 85 percent of the energy we use. A carbon tax would impose a new tax on the vast majority of our nations
economic activity. Fossil fuels power our nation and produce 85 percent of the energy we consume in the United States. Nuclear and
hydro power produced an additional 11 percent of our energy. The remaining 4 percent comes from other renewables like biofuels, wind,
and solar. Carbon taxes may make hydro and nuclear power more attractive, but few sites remain where it is possible to build large
hydroelectric dams and new nuclear power plants face major political obstacles.
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Carbon Tax Undesirable: EconomyCalibration Problems

1. An improperly calibrated carbon tax can result in enormous economic losses
DICE-2007 contains simulations not just of the baseline (no controls) and the optimal carbon tax scenarios, but of many other policies as
well. The results show that the dangers from an overly ambitious and/or inefficiently structured policy can swamp the potential benefits
of a perfectly calibrated and efficiently targeted one (i.e. the optimal carbon tax scenario). As Table 4 indicates, Nordhaus optimal plan
yields net benefits of some $3 trillion (consisting of $5 trillion in reduced climatic damages and $2 trillion of abatement costs). Yet some
of the other popular proposals have abatement costs that exceed their benefits. The worst is Gores 2007 proposal to reduce CO2
emissions 90 percent by 2050; DICE-2007 estimated this plan would make the world more than $21 trillion poorer than if there were no
controls on carbon.
2. Using a carbon tax to achieve steep cuts would be economically devastating, outweighs the negative effects of
warming
Some comments on Table 4 are in order. The optimal carbon tax is the best policy for two related reasons: first, it is calibrated to balance
marginal abatement costs against marginal benefits from avoided climatic damage; and second, it uses a very flexible tool (namely, timevarying penalties on carbon use) that can be perfectly correlated (in the DICE model, at least) with the level of damages inflicted on the
world. In contrast, the Gore proposal is disastrous because it fails on both counts. First, its ambitious reductions in environmental
damage are achieved at a price that exceeds the benefits. Second, by choosing a somewhat arbitrary and blunt tool (namely, a reduction
in emissions by a certain date), this aggressive containment of environmental damages is achieved at a higher cost than necessary. For
example, if Gore had instead proposed to limit CO2 concentrations to 1.5 times their preindustrial value (i.e. 420 ppm), then abatement
costs and environmental damages would both be lower than what his emissions reduction would achieve. In a cost-benefit approach to
climate policy, the variable of ultimate concern is the damage inflicted on humans from a changing climate. In the DICE model (and
presumably in the real world), this damage can be directly traced back to a given amount of warming, which in turn can be traced back
to CO2 concentrations, and then to emissions. A blunt policy which cannot vary over time (unlike the carbon tax) will be worse, the
further along this chain of causality it focuses its attention.
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Carbon Tax Undesirable: EconomyCapital Flight

1. Carbon taxes only spur capital flightborder adjustments fail
4) Carbon taxes engender industry and capital flight, and become highly contentious. As for the idea of border adjustments, some argue
that such adjustments would violate international trade accords and would be hard to deal with given current international institutions.
Others argue that even if you could implement them, border adjustments arent useful.
2. Carbon taxes will increase energy prices threatening offshoring and hurting our global competitiveness
Energy is the lifeblood of the economy. Policies that increase the price of energy harm the economy. However, the entire point of
policies like carbon taxes and cap and trade is to increase energy prices. These cost increases make the economy less efficient
domestically and it makes the United States less economically competitive internationally. Higher energy prices harms Americas ability
to grow its economy at home and it means more American jobs will be shipped overseas. Now is not the time to implement an
economically harmful plan like carbon taxes or cap and trade. Americans need an efficient economy to reverse the recession and
improve the lives of American workers. Carbon taxes and cap and trade will just make it more difficult to reverse the recession.
3. Domestic carbon taxes spur offshoring

10. Domestic carbon taxes will force more industries to leave America. Energy costs are a major expenditure for heavy industry.
Americas natural gas prices are the highest in the world, even though we have the worlds sixth largest proven natural gas reserves. The
high price of natural gas has significantly contributed to the loss of more than three million manufacturing jobs since 2000. Carbon taxes
will drive up the cost of natural gas because companies would use it as a substitute for coal in electricity production, which means
increased electricity costs for industry and increased natural gas prices. This is especially troublesome for chemical companies, all of
which use natural gas not only as an energy source, but also as a feedstock. Higher natural gas prices will force them to pursue options
offshore and overseas, reducing American jobs.
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Carbon Tax Undesirable: EconomyCarbon Spillover Benefits

1. Carbon use produces enormous benefits that our opponents calculations ignore
Furthermore, proper application of a Pigovian Tax requires recognition of positive externalitiesthe benefits that are not captured by the
producersand not just the negative externalities. Suppressing bad effects counts as benefit, but suppressing beneficent ones must be
put on the other side of the ledger as a cost. An obvious example is that proponents of the carbon tax assume that the level of CO2 which
existed a century or so ago is the optimum, and that the rise that has occurred since is a problem. In the history of the earth, the
temperature and CO2 levels have been higher and the results have been benign. It is distinctly possible that increasing CO2 levels in the
atmosphere would have positive effects on human and planetary welfare, not just negative impacts. One report identified fifty-five
discrete environmental benefits from higher levels of CO2 none of which are factored into the carbon tax debate. Another example
was identified by Indur Goklany, author of several thoughtful works on environmental policy. He pointed out that in the absence of
fossil fuels, cropland would have to increase by 150 percent to meet current food demand. Because conversion of habitat to cropland is
already the greatest threat to biodiversity, reducing CO2 emissions will come at a price in biodiversity. At a higher level of abstraction,
another set of considerations exists. These are not really within the formal Pigovian analytic framework, because economists are picky
about what they score as an externality or spillover. Nonetheless, whatever label is applied, one can see costs to the public that are not
reflected in the conventional estimates of the impact of a carbon tax. For one thing, the core of a competitive market economy is that
producers do not capture all of the benefits of their activities. Consumers obtain massive benefits by paying less than the value to them
of the goods and services they purchase. (That is, a consumer would be willing to pay a higher price if necessary, so he benefits from the
difference between the actual price and this higher willingness-to-pay price, a difference called consumer surplus.) When one
considers the uses of energy, it is clear that energy is a source of substantial consumer surplus, and it is channeled into a multitude of
other goods and services, ranging from food production to entertainment to medicine. The impact of government appropriation of
consumer surplus does not seem to be within the compass of Pigovian analysis, but to the extent that a carbon tax eliminates these
surpluses, it will cost us heavily, in ways that are not commonly counted in assessing the wisdom or level of the tax.
2. Carbon tax costs are understatedthey ignore the ancillary benefits of carbon/energy use
The third circle contains problems with the basic theories used to support the carbon tax. In economic theory, taxes on bad things are
intended to compensate for the fact that some of the harms caused by the bads are not paid for by the producers. They spill over and land
on others. Because the producers do not incur the full costs, the bads are over-produced. This theory is correct, but incomplete. It does
not account for the complementary principle that many benefits of an activity or product are not captured by the producer. These, too,
spill over to the advantage of others. Because the producers do not get all the benefits, they will produce less than they would if the costs
and benefits were both concentrated in the hands of those responsible for the activity. A simple example is that when a homeowner
paints his or her house, the whole neighborhood benefits, while letting the house go to ruin harms everyone. Housing developments deal
with this issue by requiring each owner to maintain his property at his own expense, so that all pay and all benefit from the actions of the
others. Discussions of a carbon tax focus on the negative spillovers, that is, on possible damage from CO2 emissions. But the spillover
benefits of energy are also immense and difficult to measure. As depicted in the chart on page 16, increased use of energy, and especially
cheap energy which is largely carbon-based, is intertwined with the extraordinary increase in global wealth over the past two centuries.
A policy focused only on the negative side presents an unbalanced picture. Also, objective studies of the impact of an increase in CO2 in
the U.S. establish that there will be positive benefits from the increase. Imposing a carbon tax to reduce the emissions would forego
these benefits as well. Again, accentuating the negative without referring to the positive distorts the picture.
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Carbon Tax Undesirable: EconomyEnergy Prices

1. A carbon tax will jolt electricity prices upward
13, p. 33.
The electricity sector has the highest carbon intensity and thus the impacts of the carbon tax are large. Figure 25 shows the residential
delivered electricity prices in the Baseline and the two tax cases. In the Baseline, residential electricity prices are projected to increase
primarily due to increasing fuel prices over time. The addition of a carbon tax in 2013 is an immediate shock to prices, which is
tempered slightly by fuel switching from coal-fired generation to natural gas-fired generation. As the carbon tax price increases, so do
the impacts on price, although in the later years of the 80% Reduction Tax Case the electricity sector is nearly completely decarbonized,
so the higher carbon prices have a more limited percentage impact.
2. Carbon taxes increase energy costs, acting as a drag on the economy

13, p. 22.
The addition of carbon taxes to the Baseline creates additional costs to the U.S. economy. The carbon taxes add to the costs of energy
use because the tax is applied to the sale of fossil fuels that emit carbon. Thus, the costs of consuming coal, natural gas, and petroleum
products (e.g., gasoline) increase. The increases in energy costs ripple through the economy and result in higher costs of production and
less spending on non-energy goods. The economic impacts of these cost increases are at least partially offset by the effects of the manner
in which the carbon tax revenues are used, which we assume is for reductions in the Federal debt and PIT rates. Lowering the debt
results in lower costs to service the debt, while lowering PIT rates reduces the distortionary impacts of these taxes.
3. Low-income families would be most affected by the price increases spurred by a carbon tax
Energy is an important component of the price of all kinds of industrial goods, services and transportation. Even the Internet is greatly
affected by energy prices; power represents 40 percent of the operating cost of a typical large data center. As William OKeefe, CEO of
the George C. Marshall institute noted in The Wall Street Journal, [E]nergy is consumed to produce things that people value, and there
are no near-term substitutes for fossil fuels. So a carbon tax would affect food prices, consumer goods, electricity, mobility, charitable
works and more. The effect would not be small. Resources for the Future, a Washington think tank which is a strong supporter of the
carbon tax, estimates: A tax of $25 per ton of CO2 could add about 21 cents per gallon to the price of gasoline and about 25 cents per
gallon to the price of diesel fuel. The price of natural gas could increase by about $1 per thousand cubic feet, the price of coal by about
$40 per short ton, and the price of electricity by about 1.2 cents per kilowatt-hour. This would represent an increase in electricity costs of
10 to16 percent, depending on the area. Consumers would feel it, especially those at the lower end of the income scale. An analysis by
the Heritage Foundation, using EIA data, found that a $25/ton carbon tax would raise the energy bill of a family of four by $500,
excluding gasoline, and increase gasoline prices by $0.50/gallon. It would cut the familys income by $1,900 in 2016, and, if increased at
5 percent per year after inflation, would inflict losses averaging $1,400/year through 2035. Lower income families would be most
affected because they spend a higher share of their income on energy. Furchgott-Roth wrote: Data from Labor Department . . . show
those in the lowest fifth of the income distribution spend an average of 24 percent of income on energy, compared to 10 percent of
income for those in the middle fifth, and 4 percent of income for those in the top fifth. A study by the Congressional Research Service
(CRS) concluded that a $15/ton carbon tax would reduce after-tax income for taxpayers in the lowest income deciles by 3.4 percent,
while taxpayers in the highest income deciles would see their income fall by 0.8 percent
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Carbon Tax Undesirable: EconomyExport Competitiveness

1. Carbon taxes will significantly hurt manufacturing because of higher energy prices
The Industrial Energy Consumers of America is a trade association of companies that are energy intensive and trade exposed, such as
chemicals, plastics, fertilizer, steel, aluminum, paper, cement and glass. It estimates that a $15/metric ton carbon tax would raise
manufacturing costs by $17 billion/year, and a $50 tax by $56 billion. The National Association of Manufacturers (NAM), relying on a
study by the economic consulting firm NERA, concluded that as a result of a carbon tax manufacturing output in energy-intensive
sectors could drop by as much as 15.0 percent and in nonenergy-intensive sectors by as much as 7.7 percent. Obviously, immense
pressure will be exerted to alleviate the stress on these industries. Reponses suggested include exemptions from the tax, output-based
rebates, or adjustments at international borders. All of these raise serious difficulties. Who would get exempted and by how much? How
would the nation reconcile the goal of the law reduce emissionswith the reality of exempting those with high emissions and the
inevitable undercutting of emissions goals? What about competitive effects? Where is the line between who is exempted and who is not?
What about firms that already reduced emissionsare they to be penalized and their competitors rewarded? In essence, it appears that a
carbon tax scheme would simply add another tax system one that would rapidly grow in complexity and add another layer of
distortion and administrative costs. On the other hand, if nothing were done to help energy-intensive industries, they would leave the
U.S. for more friendly nations as quickly as possible. The result would be a lose-lose situation: the U.S. would lose jobs and investment,
but the emissions would still take place, only somewhere else. But because climate change is a world issue, shifting emissions from one
place to another is pointless. In those parts of the country where a manufacturing renaissance is underway, much of the momentum
behind the revival comes from the rise of America as a global energy powerhouse, producing record amounts of oil and natural gas and
in the process driving down one of the chief costs of manufacturing production, namely power. Aborting this promising development
by raising energy costs by an unknown percentage would be folly.
2. Carbon taxes hurt exportsBritish Columbia proves

Jock Finlayson, Executive Vice-President, Policy, Business Council of British Columbia, Carbon Tax Challenges, 31108, p. A15.
But it is already evident that some of our key export industries will be challenged by the carbon tax. Companies in the lumber, pulp and
paper, mining, pipeline, cement, chemicals, food processing and fabricated metals industries tend to be fairly heavy users of fossil fuels
to run their operations, transport goods, or both. Importantly, these industries generate two-thirds of all of B.C.'s merchandise exports.
Many exporters won't be able to pass on higher costs from the carbon tax to their customers. So unless they can reduce their use of
energy sufficiently to offset the impact of a rising tax on fossil fuels, a number of export-oriented sectors will see their costs go up under
the province's carbon tax regime.
3. Carbon taxes encourage imports for energy-intensive goodsBritish Columbia proves

Jock Finlayson, Executive Vice-President, Policy, Business Council of British Columbia, Carbon Tax Challenges, 31108, p. A15.
Also worth noting is that the carbon tax may increase incentives to import energy-intensive manufactured goods instead of producing
them here. As fossil fuel taxes climb, it is likely to become harder to attract investment into existing or new value-added energy and
industrial plants here that depend on affordable supplies of natural gas, particularly if the goods produced by these plants are shipped by
rail or truck to the Port of Vancouver or the United States. The risk of this happening will be greater if nearby provinces and states fail to
levy their own carbon taxes, in which case firms in these jurisdictions will enjoy access to B.C. resources on a carbon tax-free basis, at a
time when our resource, manufacturing and transportation companies are absorbing higher fossil fuel costs. As the province fleshes out
its climate change plan, it should pay close attention to how the carbon tax and other related policy measures affect the competitiveness
of B.C.'s major export sectors. Particularly if competing jurisdictions eschew carbon taxes, the government may need to look for ways to
offset the higher business costs associated with a "made-in-B.C." carbon tax policy.
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Carbon Tax Undesirable: EconomyJobs

1. A carbon tax will result in substantial job losses
13, p. 5-6.
The total reduction in labor income is spread over many workers, most of whom continue to work, but its dollar magnitude can be placed
in context by estimating the equivalent number of average jobs that such labor payments would fund under baseline wage rates. To state
the labor income changes in terms of such job-equivalents in Figure 3, the reduction in labor income is divided by the annual baseline
income from the average job. Again, a loss of one job-equivalent does not necessarily mean one fewer employed personit may be
manifested as a combination of fewer people working and less income per worker. However, this measure allows us to express
employment-related impacts in terms of an equivalent number of employees earning the average prevailing wage. Note that the
NewERA model, like many other similar economic models, does not develop projections of unemployment rates or layoffs associated
with reductions in labor income; modeling such largely transitional phenomena would require a different type of modeling methodology.
For the $20 Tax Case, labor income declines by about 1.0% to 1.4% throughout the period, resulting in job-equivalent losses that range
from about 1.5 million job-equivalents in 2013 to about 3.8 million job-equivalents in 2053. Under the 80% Reduction Tax Case, labor
income reductions range from about 1% in the early years to more than 8% by the end of the period, resulting in job-equivalent losses
ranging from about 1.3 million job-equivalents in 2013 to almost 21 million job-equivalents by 2053.
2. Even small carbon taxes will significantly cut family income and employment
Noting that gas prices have fallen by more than a dollar in 2014, Summers estimates that a $25-a-ton carbon tax would raise more than
$1 trillion in revenue over the next decade yet would lift gasoline prices by only about 25 cents. Such a deal! For a mere 25 cents a
gallon, we can raise $1 trillion. In 2012, the EIA analyzed the impacts of a similar proposal a carbon tax that starts at $25 per ton
and increases by 5% per year after inflation. Kreutzer and his colleague Nicolas Loris wrote a commentary on EIAs carbon tax analysis.
Compared to the baseline (no carbon tax) case, the policy would: * Cut the income of a family of four by $1,900 per year in 2016 and
lead to average losses of $1,400 per year through 2035; * Raise the family-of-four energy bill by more than $500 per year (not counting
the cost of gasoline); and * Lead to an aggregate loss of more than 1 million jobs by 2016 alone. Twenty-five cents here, twenty-five
cents there, and pretty soon were talking real money.
3. A carbon tax will destroy far more jobs than it will create
James Taylor, staff, No, a Carbon Tax Cannot Create Jobs, Jobs, Jobs, FORBES, 10814,
www.forbes.com/sites/jamestaylor/2014/10/08/no-a-carbon-tax-cannot-create-jobs-jobs-jobs/, accessed 1-9-16.
A tax on carbon dioxide emissions would destroy far more jobs and wealth than it would create, despite the well-intentioned hopes of
Forbes.com contributor James Conca. In a Forbes.com article titled Can A Carbon Tax Create Jobs, Jobs, Jobs, Conca argued a carbon
dioxide tax would result in a net increase in jobs if the tax revenues were spent wisely. Key to this hopeful prognosis, Conca asserted, is
the requirement that a newly imposed tax on carbon dioxide must be revenue-neutral, with carbon dioxide tax collections being offset on
a dollar-for-dollar basis by tax reductions in other sectors of the economy. Conca never explained how merely shifting tax burdens from
one sector of the economy to another creates jobs and wealth. Instead, he simply cited three short articles and one longer paper written
and published by liberal activists. On important policy issues of the day, however, blindly deferring to self-serving papers written by
liberal activist groups, such as the notorious Center for America Progress, is a recipe for disaster. Yes, that is the same Center for
American Progress that championed Solyndra and promised Obamacare would lower healthcare premiums, create jobs, and make
American families richer.
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Carbon Tax Undesirable: EconomyMultiwarrant / General

1. Carbon taxes impose substantial economic costs, as proven by multiple measures
In early 2013, a Heritage paper looked at the economic impacts of a carbon tax that was included as a side case in the EIAs Annual
Energy Outlook 2012. That analysis noted the following impacts of a $25 per ton tax on carbon dioxide: * Cut the income of a family of
four by $1,900 per year in 2016 and lead to average losses of $1,400 per year through 2035; * Raise the family-of-four energy bill by
more than $500 per year (not counting the cost of gasoline); * Cause gasoline prices to increase by up to $0.50 gallon, or by 10 percent
on an average gallon price; and * Lead to an aggregate loss of more than 1 million jobs by 2016 alone. Again, it should be noted that the
NEMS and the HEM both include the changes in behavior and investment in energy-saving technology that firms and households will
undertake to adjust to higher prices. So, the projected income and job losses are over and above any offsetting gains found in industries
and services that provide low-carbon and no-carbon alternatives. The Annual Energy Outlook 2014 (the most current edition) also has a
$25 per ton carbon-tax side case. Again the GDP losses are significant, exceeding $150 billion for many years, and the jobs losses are
severe, with employment in some years falling below the no-carbon-tax reference case by more than one million jobs. So, carbon taxes
will drive up energy costs, reduce employment, and cut income.
2. Carbon taxes will decrease overall household consumption

13, p. 23.
In this study, we report reduced consumption per household as a dollar value relative to current average consumption levels to make it
easier for readers to put these estimates into context with current household consumption and income. Figure 13 shows the change in
consumption per household for the $20 Tax Case for individual regions and the U.S. as a whole in selected model years and on average
as a present value over the model horizon. On average, U.S. household consumption declines by $20 in 2013, a negative impact that
increases to $440 by 2053. Regions fare better or worse than the U.S. average primarily due to each regions relative carbon intensity,
which is a significant determinant of the increases in costs that consumers in a region will experience as a result of the carbon tax. Figure
14 includes the change in consumption per household for the 80% Reduction Tax Case. The higher carbon taxes over time produce
substantially larger losses in consumption than in the $20 Tax Case in the later years. On average for the 80% Reduction Tax Case, U.S.
household consumption declines by $80 in 2013, which increases to almost $2,700 by 2053.
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Carbon Tax Undesirable: EconomyTax Interactions

1. Carbon taxes interact negatively with other taxesmagnifies the taxs negative effects on economic growth
Robert P. Murphy, Patrick J. Michaels and Paul C. Knappenberger, analysts, The Case Against a Carbon Tax, CATO WORKING
PAPER n. 33, Cato Institute, 9415, p. 22.
The technical phenomenon in the literature driving these results is the tax interaction effect, in which a new green tax (such as a
carbon tax) interacts with the preexisting, distortionary taxes on labor and capital and makes them more damaging. Note that the carbon
tax raises consumer prices and effectively reduces the aftertax earnings of labor and capital, acting as its own (implicit) tax on labor and
capital, but with the difference that it is concentrated in particular areas, rather than spread uniformly over all labor and capital. This is
the intuition behind the results found in the literature: as a general rule, even a dollarfordollar carbon tax swap deal will hurt the
conventional economy. Thus we see that the typical progrowth case for the carbon tax gets things exactly backwards: Generally
speaking, to the extent that the U.S. tax code is already filled with distortions, the case for implementing a carbon tax of a particular
magnitude is actually weaker, not stronger, even if we are assuming full revenuerecycling by reduction of those preexisting,
distortionary taxes.
2. The consensus says that tax interaction effects ensure that a carbon tax will hurt the economy
The impact of the tax interaction effect on policy design can be enormous: For example, as Table 1 indicates, in the case of a $50
social cost of carbon, if the carbon tax receipts are to be returned in lumpsum fashion, then the optimal carbon tax with all feedback
effects on the tax system taken into accountis zero. This outcome reflects the fact that introducing even a very modest carbon tax
(such as a mere $1/ton) would exacerbate the deadweight losses of the preexisting taxes so much that the marginal economic costs
swamp the stipulated $50/ton environmental benefits of the carbon tax, meaning that it would be betterall things consideredto not
levy even the modest carbon tax in the first place. The policy wonks pushing a carbon tax on libertarians and conservatives almost never
include this type of possibility in their discussions, even though (at least qualitatively) this is the consensus view in the literature. It is
true that given a carbon tax, it is better to use the receipts to reduce tax rates, rather than spending the money or returning it lumpsum to
citizens. That is why Table 1 shows that in the case of a $50 social cost of carbon, the optimal carbon tax with personal income tax rate
reduction is $27. Thus, putting the U.S. policy debate in terms of our Table 1 the analysts pitching a carbon tax to libertarians and
conservatives have been focusing on the fact that $27 > $0 (i.e. its better to use carbon tax receipts to fund tax rate reductions rather
than other uses). But they almost universally ignore the fact that $27 < $50, meaning that carbon taxes make sense only if there are high
environmental damages from emissions, and even in that caseand even with a fully revenueneutral tax rate swapwe would still
implement only a carbon tax much lower than the assumed social cost of carbon.
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Carbon Tax Undesirable: EconomyWages

1. Carbon taxes cut wagesdecrease demand for labor
13, p. 24-25.
Figure 15 includes labor impacts due to the carbon taxes (and resulting changes in Federal PIT rates). The wage rate declines as the
carbon tax rate increases because of lower demand for labor as companies have higher costs and lower output. Labor income is a
function of the wage rate and the quantity of hours devoted to labor (as opposed to leisure). Across the cases, labor income experiences
declines that are greater than or equal to the declines in the wage rate. A larger decline in the labor income than the wage rate implies
that workers are working fewer hours, which is a response to the lower wage rate (smaller incentive to work). The labor income change
in Figure 15 can also be stated in terms of job-equivalents, by dividing the labor income change by the annual income from the average
job. A loss of one job-equivalent does not necessarily mean one less employed personit may be manifested as a combination of fewer
people working and less income per person who is working. However, this measure allows us to express employment-related impacts in
terms of an equivalent number of employees earning the average prevailing wage.
2. A carbon tax will lower overall wages

13, p. 4-5.
Figure 3 focuses on several dimensions of projected impacts on income from labor (worker income) as a result of the carbon tax. The
carbon tax leads to lower real wage rates because companies have higher costs and lower labor productivity under a carbon tax, effects
that are partially offset by the lower Federal PIT rates that are allowed by the use of carbon tax revenues. Lower real wage rates directly
reduce labor income per hour and thus lower workers incomes even if they continue to work the same number of hours. However, the
lower wage rate also decreases the willingness of workers to supply as many hours to the job market. That is, there is an incremental
shift towards greater demand for leisure, which implies reduced labor force participation. With fewer hours worked, total labor income
declines by a greater percentage than does the wage rate. These are the net effects on labor in the aggregate, and include the positive
benefits of increased labor demand in sectors providing energy and other goods and services that have low carbon-intensity.
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Carbon Tax Undesirable; EconomyAnswers to Adaptation / Innovation

1. Price signals will not spur innovation breakthroughsempirical record proves
A carbon tax would promote innovation, advocates say, by altering price signals in the energy market. If coal-powered electricity can be
generated for five cents per kilowatt-hour while solar power costs ten cents, solar power will have difficulty gaining any market share.
But if a tax drives the coal-power cost up to eight cents, one might expect solar power to become more attractive and investors to
become more enthusiastic about investing in further improvements to the technology. But empirical evidence demonstrates that the price
signal generated by the kinds of carbon taxes under consideration will not lead to technological breakthroughs. That evidence comes
from Europe, a comparably sized market to ours, where taxes and related policies have already pushed energy costs far above the levels
that a carbon tax would take them in the United States. For instance, $1 of tax on a ton of CO2 emissions adds approximately one cent to
the cost of a gallon of gas. With gas prices typically at least $4 higher than U.S. prices, Europe already has the equivalent of a carbon tax
on the order of $400 per ton of CO2. Similarly, taxes and fees drive Europe's electricity costs up to more than double U.S. rates, the
equivalent of a carbon tax of more than $200 per ton. To the extent that large price signals will produce innovation, the United States
could presumably free-ride on the incentives offered and paid for by the European market. But such innovation has not been
forthcoming, and it is unclear why more of the same signals in the American market would change the dynamic.
2. Adaptation wont mitigate the costsrenewables and efficiencies cannot make up the gap
In 2013 Senators Barbara Boxer (D-CA) and Bernie Sanders (I-VT) proposed a carbon tax in their Climate Security Act of 2013. The tax
started at $20 per metric ton and would rise by 5.6 percent per year, reaching $50 per metric ton by 2030 (the endpoint for the Heritage
analysis). Using the Heritage Energy Model (HEM), a derivative of the Energy Information Administrations National Energy Modeling
System (NEMS), Heritage projected what the economic impacts would have been had the bill become law. The impacts would have
included (dollar values are adjusted for inflation): * GDP loss of $146 billion in 2030 * A family of four losing more than $1,000 of
income per year, * Over 400,000 lost jobs by 2016, * Coal production dropping by 60 percent and coal employment dropping by more
than 40 percent by 2030, * Gasoline prices rising $0.20 by 2016 and $0.30 before 2030, and * Electricity prices rising 20 percent by
2017 and more than 30 percent by 2030. Though renewable energy grew compared to baseline levels, it wasnt enough to make up for
the lost hydrocarbon energy. In addition it is certain that businesses and households economized on energy use both by doing without
and by employing more energy efficient technologies. These responses would stimulate employment in certain sectors, but the net effect
is an overall loss in employment. The projected employment loss for 2016 was 400,000 jobs. Of course the energy-dependent sectors
would suffer relatively larger job losses. Chart 1 from the Heritage analysis shows job losses as a percent of baseline employment.
3. The tax is guaranteed to hurt the economywe do not yet have technologies ready to cheaply supplant fossil
fuels
7. Realistically, a carbon tax would lead to lower energy use and lower economic output because low-carbon replacement technologies
simply do not exist. Carbon taxes effectively increase the cost of fossil fuels in an effort to make non-fossil fuels more economically
attractive. The technologies to significantly reduce greenhouse gas emissions from fossil fuels, however, are decades away and
extremely costly. Instead, the only real way to reduce greenhouse gas emissions in the short run is to reduce energy use and economic
output. Consider automobile use and gas prices. People have begun to transition toward fuel-efficient cars, but the real impact of high
gasoline prices in 2008 was to reduce vehicle miles traveled. Just as higher fuel prices led to less driving, higher energy prices will lead
to reduced energy consumption. That will lead to a corresponding drop in our ability to make economic choices. Given current
technologies, carbon taxes will result in less economic output. The graphic below illustrates that point. The implication is clearthere is
a strong correlation between energy use and GDP.
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Carbon Tax Undesirable; EconomyAnswers to Adaptation / Innovation [contd]

4. Taxes are poor tools for driving innovation
Absolute value aside, a tax is uniquely ill-suited to the task of spurring the desired innovation. If the goal is to develop products that can
compete head-to-head with fossil fuels, a well-designed program would support a nascent technology as it pursued commercialization
and scale but phase out as it matured, to ensure that producers remained focused on a cheaper-than-carbon endgame. A carbon tax does
exactly the opposite: It provides no disproportionate support at the early stages where government intervention is most justified, and it
never phases out to apply full competitive pressure. To the contrary, most carbon-tax designs actually increase dramatically over time,
guaranteeing innovators an ever-greater advantage over the fossil fuels they are supposed to be driving out of the global market with
competitive costs. Ultimately, the carbon tax is a poor tool of innovation policy because it is not designed to be one. It is an attempt to
correct the market inefficiency created by fossil-fuel consumption's failure to account for the entire cost of CO2 emissions. As a result, it
imposes significant costs on the economy as a whole while doing very little to boost the fortunes of not-yet-adopted technologies. It is
indifferent to whether people respond through innovation, through a reduction in demand, or through a willingness to pay the tax. And it
actively attempts to obscure the real, untaxed cost of fossil fuels, when it should be holding that cost up as the goal or critical cost
threshold for any new technology that aims to deliver global impact. If a carbon tax can't claim to produce significant emissions
reductions directly on either the national or international level, and if it is not the right policy tool for promoting innovations that could
themselves achieve sufficient emissions reductions, its credentials would seem rather thin. But then the shells spin again, and tackling
climate change moves to the side. Instead, proponents suggest, each marginal unit of emissions reduction is an end unto itself for which
the American people should gladly pay. But without a convincing claim to global impact, the argument for marginal benefits does not
hold up either.
5. We simply cannot cut energy consumption without negatively impacting economic growth
Philip Cross, former Chief Economic Analyst, Statistics Canada, The Carbon Tax Illogic, FINANCIAL POST, 11315,
http://business.financialpost.com/fp-comment/the-carbon-tax-illogic, accessed 1-8-16.
Third, as concluded by University of Guelph economist Ross McKitrick, energy consumption is a limiting factor in economic growth.
The idea that you can curb energy consumption without slowing economic growth is a fantasy, akin to believing Santa Claus delivers
economic growth. Fourth, tinkering with relative prices is small ball when it comes to carbon emissions. The bigger story is
technological change, notably the U.S. shift from coal to natural gas resulting from the fracking revolution that lowered greenhouse gas
emissions without a formal government policy. However, since technological change is impossible to forecast, economists play with
relative prices.
6. We cannot even be certain that energy alternatives will be available

The second circle of hell consists of a lack of specificity about future sources of energy. The chart on page 3 shows current sources of
energy in the United States. Advocates of a carbon tax lack any realistic chart showing energy sources in the future, after a carbon tax
has produced some desired amount of reduction in CO2 emissions, such as the 80 percent target of Sanders-Boxer. Nor do these
projections show any path for getting to a new constellation of energy sources. In the absence of identification of specific technologies
and their attainability, any discussion of significant CO2 reduction becomes a variation on the story of Peter Pan. If we all believe real
hard, Tinkerbell will appear in the form of an Energy Fairy.
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7. We simply do not have the technology to replace fossil fuels
Proposals to address climate change generally aim at reducing CO2 emissions by some mandated amount: President Obama committed
the U.S. to a 17 percent reduction by 2020, for Waxman-Markey the goal was 83 percent by 2050, and the more recent Sanders-Boxer
bill aims at 80 percent by 2050. Waxman-Whitehouse does not contain a reductions target, but would start with a tax of between $15 and
$35 per ton, which would increase at between 2 and 8 percent per year (after inflation), apparently forever, so the aim is to make any
emissions prohibitively costly. None of the proposals define a technological path for getting to the target. They seem to assume, like Mr.
Micawber, that something will turn up and that a government mandate is sufficient to induce the transformation. But no discernible noncarbon path exists. The lack of a technological basis undermines the credibility of any emissions-reduction goal and destroys the
credence of estimates of the costs of attaining any goal. Support for legislation must be based on models of the projected costs of
technologies that do not yet exist, or on assumed improvements in the efficiency of existing energy sources that have no empirical
support. The Energy Information Administration (EIA) has performed much of the analysis on which other studies depend, so its
assumptions about future technologies are crucial to the accuracy of many other studies. In assessing the costs of Waxman-Markey, EIA
assumed a series of conditions that are highly implausible. For instance: The . . . Basic Case represents an environment where key lowemissions technologies, including nuclear, fossil with CCS, and various renewables, are developed and deployed on a large scale in a
timeframe consistent with the emissions reduction requirements . . . . without encountering any major obstacles. Any concerned citizen
should pause over this language. Will nuclear energy be deployed without encountering any major obstacles? An avid and well-funded
opposition has fought the expansion of nuclear energy to a dead stop. Will large-scale deployment of renewables be easy, despite the
massive NIMBY problems of solar and wind and the well-deserved reputation of windmills as bird-slaughterers? Of course, the answer
to both questions is a resounding, no. The EIA analysis goes on to detail other assumptions of equally dubious nature. It also cautioned:
As previously noted, the modeling horizon for this analysis ends in 2030. Unless substantial progress is made in identifying low- and nocarbon technologies outside of electricity generation, the [Waxman-Markey] emissions targets for the 2030-to-2050 period are likely to
be very challenging as opportunities for further reductions in power sector emissions are exhausted and reductions in other sectors are
thought to be more expensive. The language here is opaque, but it seems to mean that EIA is making calculations about complicated
economic and social developments 20 to 40 years in the future without being able to describe any actual technologies that would be
used.
7. Even a natural gas shift will be enormously expensive

For example, coal for power generation is delivered primarily by railroad links between mines and generating plants. Natural gas is
delivered by pipelines. A shift to natural gas involves writing off capital investment in railroads as well as mines, and adding new
pipeline capacity to the new sources of natural gas in shale country. Furthermore, coal is easily stored in large piles at the mine head or
the utility; natural gas must be stored in special vessels, caverns, and depleted fields and delivered on a just-in-time basis. The Aspen
Environmental Group projected that replacing current coal-fired plants with natural gas would cost $700 billion, assuming it could be
done at all on any reasonable time scale. Furthermore, a shift from coal to gas would produce reductions in CO2 emissions, but perhaps
not as much as the public assumes. Burning natural gas produces about half the CO2 of coal, but fugitive methane emissions must be
captured, which raises the cost somewhat: the importance of this effect is a matter of dispute.
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8. Alternative energy sources are not ready and there are no guarantees that they can be made economical in time
Solar has its own special needs, based on its requirements for space and sunshine, costs of gathering and transmission, and back-up for
dark times. Also, current data on the costs per kilowatt hour of solar energy or wind energy that is fed into the existing carbon-fuel-based
grid do not necessarily represent the costs if the grid were to rely much more heavily on these sources. To determine whether a total
transition increases (or decreases) the costs would require an analysis of the complete system needed, not just the costs of an individual
generating facility. Improved storage must be at the core of any system that relies on renewable energy. However far down the cost
curve wind and solar are pushed, the times when these technologies generate energy does not match the times when the most energy is
demanded by consumers. Solar generation declines as residential use peaks in the early evening. Wind energy is highly variable, which
puts immense strains on the management of the electricity grid and raises the costs substantially. EIA puts the cost of wind energy at
about 8 cents per kilowatt hour; a recent study finds that the costs added by the intermittency of wind boost that to about 15 cents. For
these technologies to be reliable sources of baseline power would require cost and technological breakthroughs not only in generation,
but in energy storage.26 Engineers have been seeking improved storage methods for over a century, and it cannot be assumed that
technological breakthroughs can be conjured by waving money like a magic wand. Fossil fuels have large advantages in terms of
storage. Natural gas can be stored in large tanks, as can petroleum. This is not usually at the point of use, but the tanks mediate the
interface between production and demand. Coal can sit in piles at the point of use or at the mine head, the cheapest storage option of all.
A carbon-tax incentivized shift away from gasoline and diesel as the fuels of the auto and truck fleet would involve comparable demands
on infrastructure. The U.S. transportation system is propelled by a complex web of pipelines, trucks, and storage tanks. Shifting
significantly toward electric or natural gas vehicles would require a new retail infrastructure of charging stations, plus new investment at
all levels of the electricity-generating system to meet the new demand. If carbon tax advocates envision a transportation fleet powered by
natural gas rather than petroleum, they must also recognize that, at present, the U.S. auto and truck fleet depends on 160,000 filling
stations and thousands more private refueling stations. Shifting fuels is no small enterprise; there are at present only 1,000 refueling
stations for compressed natural gas (CNG) vehicles, and building such a facility costs up to $1,000,000. Arithmetic shows that creating
100,000 CNG stations would cost up to $100 billion. CNG is currently most useful for fleets of buses or delivery trucks that are fueled
out of a central depot. The overarching point is that no understanding of the workings and costs of proposed massive shifts in energy
sources can be attained unless realistic technological options are specified rather than assumed. As shown earlier, 86 percent of U.S.
energy comes from carbon-based sources. Anyone who asserts the feasibility of reducing emissions to any prescribed level via
renewable energy sources should also explain what the chart would look like under this scenario, and should develop a realistic path of
transition. The constraint of being specific about technologies highlights the huge obstacles to achieving any arbitrary goals. If the nation
is to rely on wind and solar energy for its electricity, then the green energy advocates must lay out reasonable scenarios for getting to this
state. They cannot assume that an energy fairy will appear.
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Carbon Tax Undesirable: EconomyAnswers to Offsets / Neutrality

1. Even offset carbon taxes hurt growthundermine investment and efficiency
Marlo Lewis, PhD and Senior Fellow, Why British Columbias Carbon Tax Is Not Applicable to America, ON POINT n. 198,
Competitive Enterprise Institute, 91614, p. 4.
Taxing Bads Does Not Necessarily Yield More Goods. Carbon tax proponents claim it is preferable to tax bads like emissions
than goods like work and investment. 36 That glib formulation ignores some importantand rather obviousfacts. Carbon taxes are
designed to increase the cost of fossil fuels, which supply 82 percent of U.S. commercial energy. 37 Energy, like labor and capital, is a
factor of production. Without affordable, plentiful, scalable fossil energy, very little of what we know as modern U.S. transport
infrastructure, manufacturing, and mechanized agriculture would even exist. Fossil energy-powered machines and information networks
continue to make critical contributions to U.S. labor productivity, the competitiveness of U.S. firms, and the attractiveness of the U.S.
economy as a place to invest. In the U.S., a carbon tax is an indirect tax on work and investment. Substituting carbon taxes for income
taxes would make the U.S. tax system less efficient and create significant market distortions. As Institute for Energy Research scholar
Robert Murphy points out, the smaller the base on which a tax of a given size is levied, the more distortionary the effects. The base of a
carbon taxparticular commodities or industriesis narrower than the base for retail sales, income, and labor taxes.
2. Even a revenue neutral tax would be inefficient, hurting the economy

Robert P. Murphy, Senior Economist, Institute for Energy Research, Taxing Carbon Wont Help the Economy, NATIONAL
REVIEW, 1715, www.nationalreview.com/article/395835/taxing-carbon-wont-help-economy-robert-p-murphy, accessed 1-2-16.
Second, even to the extent that a new carbon taxs revenues were devoted to minimizing the blow to the economy, any politically
plausible legislation would be quite inefficient from the perspective of supply-side economics. For example, many proposals include
provisions to direct funds from a new carbon tax to lower-income households, since they will be disproportionately hit by higher energy
prices. This makes perfect sense from an egalitarian point of view, but it does little to promote economic growth. Suggestions of payrolltax reductions are poorly suited to unleash entrepreneurs and job creation: On the margin, a given amount of tax reduction would be
much better targeted at the corporate rate or the top personal-income-tax bracket.
3. Even with offsets, a carbon tax will likely not promote economic growth
Indeed, in a 2013 review article in Energy Economics, Stanford economist Lawrence Goulderone of the pioneers in the analysis of
environmental tax analysis surveyed the literature and concluded: If, prior to introducing the environmental tax, capital is highly
overtaxed (in efficiency terms) relative to labor, and if the revenueneutral green tax reform shifts the burden of the overall tax system
from capital to labor (a phenomenon that can be enhanced by using the green tax revenues exclusively to reduce capital income taxes),
then the reform can improve (in efficiency terms) the relative taxation of these factors. If this beneficial impact is strong enough, it can
overcome the inherent efficiency handicap that (narrow) environmental taxes have relative to income taxes as a source of revenue.
The presence or absence of the double dividend thus depends on the nature of the prior tax system and on how environmental tax
revenues are recycled. Empirical conditions are important. This does not mean that the double dividend is as likely to occur as not,
however. The narrow base of green taxes constitutes an inherent efficiency handicapAlthough results vary, the bulk of existing
research tends to indicate that even when revenues are recycled in ways conducive to a double dividend, the beneficial efficiency impact
is not large enough to overcome the inherent handicap, and the double dividend does not arise. [Goulder 2013, bold added.]33 In short,
Goulder is saying that the bulk of research finds that even a theoretically ideal revenueneutral carbon tax would probably not promote
conventional economic growth (in addition to curbing emissions). The only way such a result is even theoretically possible is if the
original tax code is particularly distorted in a certain dimension (such as taxing capital much more than labor), and if the carbon tax
revenues are then devoted to reducing that distortion.
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Carbon Tax Undesirable: EconomyAnswers to Offsets / Neutrality [contd]

4. The tax wont stay neutrallow visibility enables stealth increases
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, 82112,
www.heritage.org/research/reports/2012/08/a-carbon-tax-would-harm-us-competitiveness-and-low-income-americans-without-helpingthe-environment, accessed 1-3-16.
Another problem with a carbon tax is that it very well could be hidden. When he was an academic, Gilbert Metcalf, an economist who
has served as Deputy Assistant Secretary for Environment and Energy in the Office of International Affairs at the U.S. Department of
the Treasury, co-authored a blueprint for taxing GHG emissions that was published in the Harvard Environmental Law Review. The
paper states that: With respect to the tax base, we show that collecting the tax upstream would make it possible to accurately and cheaply
cover 80% of U.S. emissions by collecting the tax at fewer than 3000 points, and that it would be possible to cover close to 90% of U.S.
emissions at a modest additional cost. Clearly, such a tax is not meant to be collected at gas pumps or from utility customers, which
would dramatically increase administrative costs. While a carbon tax could be more or less apparent to American citizens, depending on
its design, the advocates of such a tax have no incentive to keep the tax small. In the words of Professor Thomas Sowell, In general, the
less visible a tax is, the more revenue can be collected without resistance or electoral retribution by the voters. Accordingly, a major
concern would be the visibility of such a tax. A new carbon tax would simply give Washington another tool with which to stealthily raise
revenues and manipulate American families behavior, and any such tax should be rejected.
5. Carbon taxes will hurt the economy even if they are revenue-neutral
Second, even in the unlikely event that government returned carbon dioxide tax revenue to the American people on a dollar-for-dollar
basis, this would be revenue-neutral for government but not for the American people. The entire purpose of a carbon tax is to raise the
price of inexpensive coal and natural gas so high as to become more expensive than carbon-free wind and solar power. However, if the
carbon tax fulfills its goal of raising coal and natural gas prices higher than wind and solar prices, energy providers will no longer use
coal and natural gas and energy producers will therefore pay little if any carbon tax. As a result, consumers will pay dramatically higher
energy prices but receive little if any compensating tax cuts in return. American families net disposable income will drop, which will
reduce spending and destroy jobs in all other sectors of the economy. The only beneficiary of this energy-policy Ponzi scheme will be
the renewable energy industry. This explains why the renewable energy industry-funded Center for American Progress supports the
Ponzi scheme so much. No credible economists claim that reducing American households disposable income will grow the economy
and create jobs. Yet taxing carbon dioxide sufficiently to reduce carbon dioxide emissions will by purpose and design dramatically raise
energy costs in a manner that will substantially reduce American household income while generating few corresponding tax rebates.
Economically, all that will be accomplished will be poorer American families, economy-wide economic contraction, jobs destroyed in
virtually every American industry, and a Solyndra-style transfer of wealth from hard-working American consumers to incompetent,
uncompetitive, politically connected renewable energy companies.
6. Carbon tax revenues will not be large enough to substantially offset personal income taxes (PIT)
13, p. 25.
Our analysis finds that the net carbon tax proceeds available for reducing federal PIT rates and debt reduction are substantially less than
the gross projected carbon tax revenues. Figure 16 summarizes the results for the $20 Tax Case and Figure 17 for the more costly 80%
Reduction Tax Case. Note that the results presented in these figures are simultaneously determined so that the final amount used to
improve each years deficit (row 3) is equal to the amount by which the scenarios PIT rate reductions decrease the carbon case tax
collections (row 5), and they are both also consistent with the general equilibrium conditions that determine the carbon taxs deadweight
loss (row 2). Thus, any change in the rule for sharing net carbon revenues between the objectives of debt reduction and tax rate reduction
also will change the amount of net carbon revenues available, and cannot be estimated without a separate model run.
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7. Carbon taxes are worse than other taxesthey will hurt the economy even with offsets
If the case for emission cutbacks is weaker than the public has been led to believe, the claim of a double dividend is on even shakier
ground. There really is a consensus in this literature, and it is that carbon taxes cause more economic damage than generic taxes on
labor or capital, so that in general even a revenue neutral carbon tax swap will probably reduce conventional GDP growth. (The driver
of this result is that carbon taxes fall on narrower segments of the economy, and thus to raise a given amount of revenue require a higher
tax rate.) Furthermore, in the real world at least some of the new carbon tax receipts would probably be devoted to higher spending (on
green investments) and lumpsum transfers to poorer citizens to help offset the impact of higher energy prices. Thus in practice the
economic drag of a new carbon tax could be far worse than the idealized revenue neutral simulations depict.
8. Even revenue-neutral schemes will harm specific industries

Even carbon pricing plans that are revenue neutral overall can cause significant harm to specific industries, groups and regions within a
jurisdiction, leading to the development of fierce, concentrated political opposition that can result in policy reversal. If governments
develop strategies to compensate the losers of carbon pricing initiatives, political opposition may be blunted. In the case of Canada,
this would likely mean that a national carbon pricing program would require mechanisms to compensate Alberta and Saskatchewan to
ensure that the costs are not disproportionately borne by a specific region of the country.
9. Claims that a revenue neutral tax wont hurt the economy are wrongignore the major different in what we
are taxing
Third, the true policy wonk who wants to assess the impact of a carbon tax needs to research the so-called tax interaction effect. This
is a well-known result in the economics literature, but it has had surprisingly little impact on the broader carbon-tax policy debate. Most
people in the public-policy debate get this issue exactly backwards. It is true that, given a massive new carbon tax, the blow to the
economy can be reduced if the revenues are devoted to reducing preexisting taxes, rather than funding more government spending.
However, that is not the same thing as saying that a new carbon tax, tied dollar-for-dollar with tax cuts elsewhere, is better for the
economy than not having a carbon tax at all. Stelzer says a dollar-for-dollar swap would boost the economy by shifting the tax burden
from good stuff like work to bad stuff like pollutants. But the tax interaction effect shows that when you start out with preexisting
distortionary taxes on labor and capital, a new carbon tax exacerbates their harm. Specifically, the carbon tax makes prices rise, reducing
the effective after-tax income from working and investing, and thus increasing the deadweight loss from taxes on labor and capital.
Because a carbon tax is levied on a much smaller base than broader labor or capital taxes, the baseline result in the formal modeling is
that even if 100 percent of the carbon tax receipts are devoted to other tax cuts, the conventional economy will probably be hurt. Far
from offering something for everyone, a revenue-neutral carbon tax advances the policy agenda of the environmental Left at the expense
of the American people. The economic theory of a carbon tax is unmoored from political reality. In practice, carbon-tax supporters have
shown that they would rather spend the revenue on pet projects than reduce taxes, thereby hindering economic growth. Conservatives
should resist the temptation to give central planners in Washington more money to waste and more control over our economic affairs.
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Carbon Tax Undesirable: EmpiricallyAustralia

1. Australia proves that the tax does not work
Shikha Dalmia, Senior Policy Analyst, Reason Foundation, Australias Carbon Tax Debacle Shows Why Its a Bad Idea,
WASHINGTON EXAMINER, 72414, www.washingtonexaminer.com/australias-carbon-tax-debacle-shows-why-its-a-badidea/article/2551255, accessed 1-5-16.
Environmentalists had a global meltdown last week after Australia scrapped its carbon tax. They denounced the move as retrograde
and environmental vandalism. They can fume all they want, but Australia's action, combined with Europe's floundering cap-and-trade
program, signals that mitigation strategies -- curbing greenhouse gases by putting economies on an energy diet -- are not winning or
workable. Australia leapfrogged from being an environmental laggard (initially refusing to even sign the Kyoto Protocol) to a leader
when its Green Party-backed Labor prime minister imposed a tax two years ago. It required Australias utilities and industries to pay $23
per ton of greenhouse gas emissions. But the tax was an instant debacle. Australia is even more coal-dependent than America, using it
for 75 percent of its energy needs (compared to 42 percent in America). But contrary to green expectations, the tax didnt prompt
companies to rush toward renewable sources, because they are far costlier. Rather, utilities passed their costs to households -- whose
energy bills soared by 20 percent in the first year. Other industries that face hyper-competitive environment such as airlines suffered
massive losses. (Virgin Australia alone reported about $25 million in losses in just six months.) The tax also made Australian exports
globally uncompetitive, deepening the country's recession. This spawned a backlash that brought down the Labor government and
catapulted into office the Liberal Party's Tony Abbott, who made a blood promise to ditch the tax, which he kept.
2. Carbon taxes hurt businessAustralia proves

Katie Tubb, Research Associate, Heritage Foundation, Carbon Tax: Australias Experience Is a Chance for the U.S. to Get It Right,
DAILY SIGNAL, 32113, http://dailysignal.com/2013/03/21/carbon-tax-australias-experience-is-a-chance-for-the-u-s-to-get-itright/, accessed 1-5-16.
Over the past 12 months Australia has seen 10,632 companies collapse, a record high total for a single year, according to the Australian
Securities and Investments Commission. Nearly one-fifth of these companies were manufacturing and construction. Australias new
carbon tax is not solely to blame for businesses struggles, but the Australian government has been crediting the difficulties to the high
exchange rate and global competition. We accept business is under pressure [on] a number of fronts including the impact of a high
exchange rate, said Australian Chamber of Commerce and Industry economist Greg Evans. However what business operators find
hard to deal with is deliberate policy actions of government designed to increase the cost of doing business. Australias carbon tax adds
a significant new cost to businesses trying to make a profit and stay afloat. But business closures are the worst case scenario. A carbon
tax affects nearly every good and service that depends on electricity to be made, transported, and sold. These higher costs also lead to
less visible changes in the market such as deferred investments and slowed hiring. When the dust settles following the furious debate
that weve had about carbon pricing, I think Australians will come to see that this has been an important reform at the right time, said
Prime Minister Julia Gillard back in July 2012. It seems the dust has whipped up to a dust storm that will have almost no environmental
benefit or effect on global temperatures. Is Washington paying attention? Americans should run hard and fast away from the prospect of
passing a carbon tax in this country, which some on Capitol Hill are proposing as a way to make a quick buck in the face of a spending
crisis. But there is no reason to think Americas experience would be any better than Australias.
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Carbon Tax Undesirable: EmpiricallyAustralia [contd]

3. The Australian experience proves that a carbon tax will not work
On July 1, 2012, the Australian government instituted a carbon tax of $23 (Australian dollars) per ton of CO2equivalent, and raised it to
$24.15/ton a year later. The tax proved so unpopular that in the September 2013 elections, Leader of the Opposition Tony Abbott won
on a campaign which he explicitly billed as a referendum on the carbon tax. (The carbon pricing scheme was formally ended in July
2014.) Dr. Alex Robson, an economics professor from Griffith University in Brisbane, Australia who has published peerreviewed
papers on the interaction of fiscal and environmental policies, authored a 2013 study critical of the Australian carbon tax. Robsons study
shows that the introduction of the Australian carbon tax went hand in hand with a spike in household electricity prices (the highest
quarterly increase on record, p. 39) and unemployment, while many Australian business owners anecdotally reported that the carbon tax
was a key factor in their decision to lay off workers or shut down entirely. Yet beyond these drawbackswhich help to explain the
voters embrace of Tony Abbott in 2013Robsons study reveals that none of the pillars in the conservative case for a U.S. carbon tax
swap came true in the case of Australia. For example, contrary to the promise that a U.S. carbon tax could be used to provide pro
growth tax reform, in Australia the carbon tax was accompanied by so many giveaways (to mitigate the negative impact on various
groups) that the Australian government actually raised effective marginal income tax rates on 2.2 million taxpayers, compared to income
tax reductions for only 560,000 taxpayers. In the same vein, rather than allowing for a reduction in topdown environmental policy as is
promised in the U.S., the Australian carbon tax was not accompanied by any reform of their inefficient wind and solar subsidies, or
Renewable Energy Target (RET) mandates. On the contrary, Australias carbon tax was instituted along with a Clean Energy Finance
Corporation. Finally, advocates claim that a U.S. carbon tax will establish a predictable price for carbon that firms can incorporate
into their longterm investment plans. Yet in Australia, the carbon tax was a comedy of errors. Originally the government promised
during the 2010 campaign that it would not implement a carbon tax in the next 3year cycle. This promise was abandoned, as the carbon
tax was in fact introduced in July 2012, with a planned transition to a cap and trade scheme in 2015. Later the government proposed to
move to the cap and trade scheme a year ahead of time, but this was never formalized, leaving the business community uncertain. And of
course, with the September 2013 election of Abbott, the policy was upended again, with Australias carbon tax being abolished in July
2014. The realworld case of Australia shows that achieving a carbon tax most certainly does not provide policy certainty to allow
businesses to confidently make longterm decisions.
4. Carbon taxes empirically failAustralia and British Columbia prove

When moving from academic theory to historical experience, we see that carbon taxes have not lived up to the promises of their
supporters. In Australia, the carbon tax was quickly removed after the public recoiled against electricity price hikes and a faltering
economy. Even in British Columbiatouted as the worlds finest example of a carbon taxthe experience has been underwhelming.
After an initial (but temporary) drop, the B.C. carbon tax has not yielded significant reductions in gasoline purchases, and it has arguably
reduced the B.C. economys performance relative to the rest of Canada. Both in theory and practice, economic analysis shows that the
case for a U.S. carbon tax is weaker than its most vocal supporters have led the public to believe. At the same time, there is mounting
evidence in the physical science of climate change to suggest that human emissions of carbon dioxide do not cause as much warming as
is assumed in the current suite of official models. Policymakers and the general public must not confuse the confidence of carbon tax
proponents with the actual strength of their case.
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Carbon Tax Undesirable: EmpiricallyBritish Columbia

1. British Columbias experience does not justify a carbon tax
Robert P. Murphy, Senior Economist, Cato Carbon Tax Critique, Part 2: The Economics, Institute for Energy Research, 10815,
http://instituteforenergyresearch.org/analysis/cato-carbon-tax-critique-part-2-the-economics/, accessed 1-10-16.
For years, proponents of a US carbon tax have pointed to the example of British Columbia. Its provincial carbon tax was designed to be
revenue-neutral (though I know colleagues who are working on a study disputing whether it has achieved this in practice), and its fans
claim that BC has done quite well economically since the carbon tax was implemented in July 2008. Thus, fans of a carbon tax say that it
has led to a significant drop in emissions (as evidenced for example in gasoline sales) while leaving the economy unscathed. Whats not
to like? Again, not so fast. First, the latest data show thatfor whatever reasonthe initial and sharp drop in gasoline sales in BC has
largely reversed itself. Here is the relevant figure from our CATO paper: [graph omitted] As the reproduced Figure 5 shows, although
there was an initial gap that came in after the mid-2008 introduction of the BC carbon tax, as of 2014 data per capita sales of gasoline in
British Columbia were virtually identical to the rest of Canada. Analysts are still not sure exactly what happened, but it might be
something as simple as that British Columbia drivers originally responded to the new (and highly publicized) carbon tax by adjusting
their behavior, but after a few years they realized it was more convenient to keep driving and just pay the extra price at the pump. It gets
worse. Not only does it appears that the BC carbon tax has, in the long run, led to trivial reductions in gasoline consumption among BC
residents, but its also apparently hurt the BC economy. The reason we (in our CATO paper) reached a different conclusion from the
pro-carbon tax writers is that the latter merely compared the post-2008 BC economic performance to the rest of Canada. But thats not
the right comparison, because what if prior to the 2008 carbon tax the province of British Columbia had been doing much better than the
rest of Canada? Indeed that seems to be what actually happened. The reproduced Figure 6 below shows the story: [graph omitted] n
Figure 6, the red lines show the unemployment rate, both in British Columbia (solid) and Canada as a whole (dotted). It is clear that for
four years prior to the 2008 introduction of the BC carbon tax, there was a gap between BC and Canadian unemployment, which was
about 2 percentage points in 2007. But after passage of the BC carbon tax, that gap largely evaporated. We see a similar pattern with
GDP growth, depicted by the blue lines. Prior to 2008, BC enjoyed significantly higher economic growth than the Canadian average. Yet
since the mid-2008 introduction of the carbon tax, BC and Canada have experienced virtually identical rates of economic growth. In this
context, we can see how misleading it is for fans of the BC carbon tax to argue that it has had no ill effect on the province, since it has
matched the country overall. This benchmark is unsuitable, because before the 2008 BC carbon tax, the province had performed much
better than the rest of Canada, at least if we look at either the unemployment rate or rate of GDP growth.
2. Carbon taxes do not lower the tax burdenthe British Columbia example is just wrong
No Lower Taxes. A revenue-neutral carbon tax does not reduce the overall tax burden (except when it happens by sheer accident); it just
redistributes it. But that has not stopped proponents from trying to give the carbon tax credit for BCs low income tax rates. Some, like
Mother Jones reporter Chris Mooney, claim BCs carbon tax has reduced personal income taxes to where they now are the lowest in all
of Canada for individuals earning up to $122,000 Among provinces, BC does have the lowest average personal income taxes for
individuals earning between $30,000 and $125,000, but that was already the case before BC enacted its carbon tax. (Actually, the lowest
taxes in Canada are found not in any province, but in the territory of Nunavut.) As for Moylans claim that BCs 11 percent corporate
income tax is among the lowest in the G8, it is indeed lower than that of eight other Canadian provinces, but not lower than Albertas 10
percent rate. And it is higher than the corporate income tax of every U.S. state, with the exception of Iowa, which has a top rate of 12
percent.
3. British Columbia advocates are wrongthe tax will not be revenue-neutral in the U.S.
Not so Revenue Neutral. As noted, in year five of the carbon tax, BC progressives campaigned to scrap the revenue neutrality
requirement. They were unsuccessful largely because of the huge difference in budget politics between BCs Capital of Victoria and
Washington, D.C. BCs Liberal government ran a $175 million surplus in 2014, and forecasts surpluses of $184 million, $206 million,
and $451 million over the next three fiscal years. When you are flush with cash, it is easy to be revenue-neutral with new taxes.
Washington policy makers operate in a vastly different fiscal arena. Although the U.S. budget deficit is down from its 2009 peak, it is
still nearly half a trillion dollars, and the Congressional Budget Office forecasts the deficit to start increasing after 2015. Thus we can
expect the quest for revenue enhancements to resume after the November elections. Politicians most interested in a carbon tax will be
those looking for a new cash cow to milk.
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Carbon Tax Undesirable: EmpiricallyBritish Columbia [contd]

4. British Columbia proves that a carbon tax will just lead to higher taxes overall
Trojan Horse for Higher Taxes. It is not inevitable that a carbon tax, once enacted, will morph into an anti-growth policy, but climate
campaigners will push for increasingly punitive versions of the tax. British Columbia is no exception. BCs carbon tax is revenue neutral
and capped at $30 per ton, but environmentalists in the province want to rescind those features. In 2012, the Canadian Centre for Policy
Alternatives advocated hiking the tax to at least $50 per ton by 2016, applying it to coal and gas exports to other jurisdictions, and using
revenues to fund climate action programs like public transit and energy conservation. The Pembina Institute advocated increasing the tax
to $100-$200 per ton by 2020, broadening the base, and using revenues to fund greenhouse gas reduction projects. A coalition of green
groups argued for upping the tax to $75 per ton by 2020. Such proposals became an issue in the 2013 provincial elections. The
governing Liberal Party, defying pollsters predictions, retained its majority, partly because Premier Christy Clark campaigned on a
promise to freeze the carbon tax for five years. Of course, the best way to keep a new tax from harming the economy is not to enact it in
the first place.
5. British Columbia cannot serve as a modeljust too different from the U.S.
Unsuitable Geology. The chief reason BC is not an appropriate model for the U.S. is that the provinces geology, climate, and electric
supply system are extremely different from those of most American states. BCs peculiar electricity fuel mix sharply limits the damage
that a $30 per ton carbon tax can do to the provinces economy. Nearly all of BCs base-load electricity is zero-carbon hydropower. The
second largest source of electricity is carbon-neutral biomass from wood waste used to generate onsite power at pulp and lumber mills.
The third largest source is natural gas, used to meet peak demand and for load balancing; it generates less than 6 percent of BCs
electricity. The lowest-carbon fossil fuel, it is the only part of BCs electric supply system subject to the tax. 21 Like British Columbia,
Washington State and Oregon are part of the Columbia River Basin system and derive most of their electricity from hydropower
(Washington, 77.8 percent; Oregon, 75.3 percent), 22 but the U.S. as a whole gets only 7 percent of its electricity from hydro. That is
chiefly because geographical conditions are very different outside the Columbia River Basin. As Energy BC, a non-profit educational
and research institute, observes: Hydroelectric developments depend upon a combination of elevation, climate, and running water. It is
most common for hydroelectric power stations to be located on mountain rivers at points where the elevation begins to drop
significantly. High precipitation levels are needed to enhance river flow. Moreover, even where favorable geology and climate might
exist, environmental and property rights concerns today preclude construction of large dams like BCs Mica, Gordon M. Shrum, and
Revelstoke, which generate over half the provinces electricity.
6. British Columbia does not prove carbon taxes workno real economic benefit
Competitive Enterprise Institute, 91614, p. 1-2.
R Street Institute economist Andrew Moylan, in The American Conservative, described BCs carbon tax as a success story that U.S.
policy makers should emulate: Early returns on the policy are quite positive. A recent study found that the provinces gross domestic
product growth has outpaced the rest of Canada, while its corporate income tax rate has been reduced to among the lowest anywhere in
the G8 countries. Despite concerns that it might grow government, the tax has stayed revenue neutral and enjoys broad public support.
This argument is misleading for several reasons, which are outlined below. No Boost to Growth. The study to which Moylan refers,
British Columbias Carbon Tax Shift: The First Four Years, does report that BCs economy outperformed the rest of Canada during
2008-2011, but it cautions readers not to jump to conclusions. During those four years BCs GDP growth outpaced the Canadian average
by only 0.1 percent, and as the report notes, the carbon tax is just one small factor in BCs overall economic picture. In 2012, BCs
GDP growth was below both the Canadian average and the growth rates of Alberta, Yukon Territory, Manitoba, Saskatchewan,
Nunavut, and Northwest Territories, according to Statistics Canada. Similarly, in 2013, BCs GDP growth was below both the Canadian
average and the growth rates of Newfoundland and Labrador, Saskatchewan, Alberta, and Manitoba, according to the Royal Bank of
Canada. While that does not mean the carbon tax harmed BCs economy in 2012 and 2013, it clearly was not a big plus. Even the BC
Ministry of Finance, a staunch proponent of the tax as climate policy, estimates the carbon tax has had, and will continue to have, a
small negative impact on gross domestic product (GDP) in the province.
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Carbon Tax Undesirable: EmpiricallyNorway

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Emissions actually increased in Norway after it implemented a carbon tax

Pricing-Based Carbon Controls, POLICY SERIES n. 131, Frontier Centre for Public Policy, 212, p. 30-31.
Norway is often used as an example of a country with a carbon tax that went wrong. Despite early initiatives in tackling global warming
emissions, the countrys emissions actually increased by 15 per cent between 1991 and 2008. Higher oil prices in recent years sparked a
boom in its offshore oil industry that led to increasing emissions. Supporters point to the fact that while Norways GDP rose 70 per cent,
emissions rose only 15 per cent as proof of the carbon taxs worth. Additionally, emissions intensity has decreased 22 per cent since
1991, although it is worth noting that since 1996 this figure has risen slightly. It is likely Norways emissions would be somewhat higher
in the absence of the carbon tax. However, it is exceedingly difficult to isolate the effect of the tax from the other environmental
measures and economic changes that have occurred during this period.
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Carbon Tax Undesirable: Equity Concerns

1. Carbon taxes hurt low-income peoplesignificantly raise energy prices
Nicholas Loris, Fellow, Heritage Foundation, Carbon Tax: Still a Bad Idea, DAILY SIGNAL, 32113,
http://dailysignal.com/2013/03/21/carbon-tax-still-a-bad-idea/, accessed 1-4-16.
An anti-carbon tax amendment will likely be considered as the Senate attempts to pass its first budget in four years. While it has been
made quite clear that passing a carbon tax would fail in both chambers of Congress, it is important to stress why enacting a carbon tax
would be economically devastating and environmentally meaningless. As Australia is currently experiencing, the adverse effects of a
carbon tax will ripple through the economy. A majority of Americans energy needs come from carbon-emitting conventional fuels, so
Americans would not just be impacted through higher energy bills but also higher prices for the goods and services they purchase. Lowincome families that spend a disproportionately higher percentage of their budget on energy would be hardest hit. Last year, the U.S.
Energy Information Administration estimated that a carbon tax that starts at $25 and rises by 5 percent per year (after adjusting for
inflation) would: * Cut the income of a family of four by $1,900 per year in 2016 and lead to average losses of $1,400 per year through
2035; * Raise the family-of-four energy bill by more than $500 per year (not counting the cost of gasoline); * Cause gasoline prices to
increase by up to $0.50 gallon, or by 10 percent on an average gallon price; and * Lead to an aggregate loss of more than 1 million jobs
by 2016 alone.
2. Carbon taxes would disproportionately burden low-income people

The poor tend to spend a higher proportion of their earnings on energy, particularly utilities and transportation. Moreover, some
Americans use more fossil-fuel energy than others because of driving distances (rural families drive more27,700 miles per household
vs. 17,600 miles for urban households); geography (less temperate weather means more heating and cooling costs); and already
constructed energy infrastructure (coal plants are prevalent in the Midwest near mining operations). A carbon tax would
disproportionately hit these families, whose behavior is difficult to change in the short run. While economists like to imagine that the
carbon tax would be offset by reductions in taxes on capital or some other particularly economically damaging tax, the fact is that,
politically, it is far more likely that funding from the carbon tax would be used to reduce the taxs impact on the poor. Senator Barbara
Boxer (DCA), who chairs the Senate Committee on Environment and Public Works, rejected the idea of using new revenue from the
carbon tax to reduce corporate taxesa favorite idea among some on the center-rightand said that any revenues should be used to
make surethe middle class gets the breaks in the interim while we move to clean energy. Nearly all of the cap-and-trade proposals
introduced during the 111th Congress included measures to blunt the impact on less affluent families, but while such proposals would
soften the blow for low-income households, an energy tax would harm families again and again, both directly through energy prices and
indirectly through higher prices for goods and services. As Congressional Budget Office Director Douglas Elmendorf has said: [A]t any
point in which we are putting a price on carbon emissions, that would be passed through to the cost that consumers face on energy
products but also all other products that are made using fossil fuels. I dont know if there are any goods that use no energy in their
production. It seems to me unlikely. Dampening the impact on poor families was deemed a politically necessary design element for capand-trade and would likely be required in any carbon tax. Looking at compliance costs for cap-and-trade (with an allowance price
around $20 per ton), the Congressional Budget Office found that the lowest quintile lost more than three times as much income
(measured as a percentage) as the top quintile (2.5 percent as opposed to 0.7 percent). Because the poor spend a higher portion of their
income on energy and the higher energy prices are passed on to the consumer, this result is not surprising. In fact, increasing consumer
costs is a primary reason for pricing carbon, according to many of its proponents. As Treasury Secretary Timothy Geithner has
explained, it is necessary for the price of energy to increase if youre going to change how people use energy. And who will change
their behavior? It is far more likely that the poor and middle classthose who have to live from paycheck to paycheck and spend a
bigger portion of their earnings on energywill be forced to alter their lifestyles much more (drive less, heat and cool the home less,
buy fewer goods and services) than the wealthy. In addition to a clamor that carbon tax revenue be used to counteract the taxs regressive
nature, environmental groups and the alternative energy lobby will likely advocate that the revenue be spent to promote new, unproven
green technology. So-called green energy companies that have started in response to a massive government infusion of capital into
such enterprises ($44.3 billion in 2009 alone) are failing, and some are calling for an increase in funding, which has been reduced to
only $16.1 billion in 2012. The carbon tax presents a tempting revenue stream for those companies and groups: A small portion of the
funds might be directed to providing transition relief for displaced workers (such as miners), supporting basic energy research and
development, solving vexing issues associated with bringing CCS to scale, constructing any necessary transmission lines, and perhaps
encouraging conservation activities that market imperfections might otherwise block. Left unsaid is the overhead cost to administer the
taxthese interests receive their money only after it has been cycled through Washington, D.C. A new carbon tax would seek to
manipulate our behavior and would harm poor and middle-class Americans. For these reasons, it should be rejected.
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Carbon Tax Undesirable: Equity Concerns [contd]

3. Carbon tax will increase the cost of everything, destroying our economy and hurting the poor the most
Andrew P. Morriss, Professor, Law, University of Illinois, Beware: Taxing Carbon Imposes Extra Costs on Practically Everything,
THE AUGUSTA CHRONICLE, 11206, p. A5.
Did you enjoy $3 a gallon gasoline last summer? Some members of Congress have plans for a carbon tax that will get you even higher
prices. By taxing the carbon content of fuels, they hope to steer Americans toward smaller cars, mass transit and city living, and away
from SUVs, highways and suburbs. This is an astonishingly bad idea, one that will harm the economy while hitting the poor the hardest.
When you think about it, a tax on transportation is a tax on everything. A key reason for our economic success is that Americans have
access to a broad market for the things we need and the products we make. The logistics revolution of the past 20 years - centered on
innovations like "just in time" production - reduced manufacturers' costs and contributes to our prosperity. Because our food, clothes and
the materials with which we build our homes are drawn from this national market, a tax on fuels is a tax on everything. Raising taxes on
everything we buy is a quick way to sicken our economy.
4. The burden borne by low-income people will be much higherrecent study proves
The primary fiscal problem with a carbon tax is its uneven burden. Its regressivity with respect to income is well known. As with any
consumption tax, it both falls more heavily than an income tax on lower-income households (who consume a higher proportion of their
income) and lacks a means to impose the progressive structure that an income tax can offer. Even as compared to other consumption
taxes, though, a carbon tax is particularly regressive because energy consumption increases less quickly with income than other forms of
consumption. A 2012 report by scholars at the American Enterprise Institute and the Brookings Institution, for instance, found a carbontax burden as a share of income to be more than five times higher on the lowest income decile than on the highest, the equivalent of
proposing a new income tax with a rate of 10% for the poorest Americans but only 2% for the richest. Even as a share of consumption
(and thus relative to other consumption taxes), the burden was nearly two times higher on the lowest decile than on the highest.
5. Consumption taxes hurt the poor and generate loopholes that exacerbate equity problems
S. Fred Singer, Research Fellow, Independent Institute and Professor Emeritus, Environmental Sciences, University of Virginia, Just
Say No to a Carbon Tax, AMERICAN THINKER, 10714, www.independent.org/newsroom/article.asp?id=5152, accessed 1-9-16.
A carbon tax is of course a consumption tax that raises the price of all manufactured goods and their transportation. Its burden falls most
heavily on households in lower income brackets, which spend a larger fraction of their income on essential goods and services. Yet
many economists favor a consumption tax as a more effective way of financing government operations and promoting economic growth
than other forms of taxation, like taxes on income or capital. Many politicians have favored a consumption tax from time to time. A good
example was presidential candidate Herman Cain, who proposed a consumption tax when he ran for the Republican nomination in 2012.
Economists who favor such a tax often insist that it must be revenue-neutral, by reducing some other taxes so as to keep total revenue
constant. This means it is not superimposed on other taxesalthough in the current political environment theres no guarantee this will
happen. But lets first discuss the drawbacks of alternatives, such as a VAT (Value-Added Tax) or a Federal sales tax. As is the case for
all consumption taxes, these are all regressive; some adjustments will have to be made to protect low-income households. Aside from
that, we should compare the four methods in the matter of efficiency and the cost involved in running such a tax. A VAT is the most
invasive of all of these taxes, involves large amounts of bookkeeping, inspections, control, and other costs. European experience with
VAT has shown that it must be at least 15% of the value of goods to make any sense. A Federal sales tax has some of the same problems
as a VAT. In addition, one can visualize a large amount of cheating going onespecially if the tax is 10% or greater and provides
incentives for such behavior. And there are always the problems of defining exemptions for certain goods and for particular classes of
users.
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Carbon Tax Undesirable: Equity Concerns [contd]

6. Carbon taxes are enormously regressivehurt the poor the most
OF COURSE, if carbon-tax supporters were proposing a national tax on everything, they'd be laughed out of town as soon as they
opened their mouths. Every can of food, every book and every piece of clothing that you buy that wasn't raised next to the store where it
was sold will cost more with a carbon tax. The only difference from an explicit "tax on everything" is that a carbon tax would be hidden,
embedded in the price of everything you bought. There are three kinds of taxes: Progressive taxes, like our income tax's rising rates for
higher incomes, take a larger proportional bite from the rich than from the poor. Flat taxes take the same proportion from everyone.
Regressive taxes take a higher proportion of the income of the poor than of the rich. Tax experts debate the relative merits of flat and
progressive taxes but there is no case for regressive taxes. A carbon tax would be regressive because poorer people spend a higher
proportion of their incomes on energy-related products. On average, families making between $10,000 and $30,000 a year spend 10
percent of their income on energy while families making more than $50,000 spend 3 percent. Taxing the poor more than the rich is not
just economically dumb, it's morally wrong.
7. Carbon taxes are regressivethey tend to hurt poor people

2) Carbon taxes are regressive. Poorer people spend a higher portion of their household budget on energy than do the better off. If you
were to posit redistributing the tax to the poor, you could deal with this, but if your tax is just a new revenue stream for government
(which it will become sooner or later regardless of the initial design), higher energy costs and higher costs for goods and services are
going to slap the lower-end of the income spectrum hard.
8. Low-income families will be hit hard by a carbon taxrecent studies prove

For the rest of society, perhaps the worst problem with a carbon tax is that it is extraordinarily regressive. Because poorer households
spend a much greater share of their income on energy than do wealthier households, the price increases created by a tax eat up a greater
share as well. Economists from the Brookings Institution and American Enterprise Institute found that a $15-per-ton carbon tax would
cost the bottom 10 percent of households more than 3.5 percent of their income, and most taxes under consideration are two to three
times higher. Thats the equivalent of a new income tax of 10 percent for the lowest-income households and 2 percent for the highestincome ones.
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Carbon Tax Undesirable: FailsGeneral

1. Any feasible carbon tax provides no health of environmental benefits
3) Taxing carbon gets you virtually no climate or health benefit unless it exists within some binding, international carbon control regime,
which is unlikely to occur even the author of the NYT article acknowledges this. China and India will dominate global carbon
emissions for the next century, while emissions in the U.S. and developed world are already level or in brisk decline. And, global
negotiations over carbon controls have become an utter farce in which developing countries go fishing for wealth and intellectual
property transfers, while developed countries mouth platitudes and make promises they have little intention of keeping.
2. Governments can fail to properly implement a carbon tax

Thus far in the paper we have focused on technical criticisms of Nordhaus calculation of the optimal carbon tax profile. Yet these
arguments, though important, may divert economists from the most serious dangers of a massive new carbon taxation program. To put it
succinctly, Nordhaus proposaland others like itare overly optimistic about the potency of government regulation, and unduly
pessimistic about the creative responses of a market economy. Those calling for a carbon tax focus on market failure but ignore the
possibility of government failure.
3. We cannot set an optimal carbon taxtoo many methodological problems

4. It is impossible to create an optimal carbon tax. A carbon tax would need to be set at an optimal level that accounts for the economy
and climate science. This is an impossible task. One of the greatest insights of the 20th century was that economically efficient central
planning is not possible. Friedrich Hayek and others demonstrated that central planners cannot aggregate all of the information necessary
to make economically efficient choices.[ Their insight remains true today. A planner (or Congress) cannot create an optimal tax because
he or she does not have all of the necessary information. With global warming, the lack of perfect information is further compounded by
partisan politics and uncertain climate science. This makes it impossible to determine an optimal carbon tax. The cost of a carbon tax
will increase the costs of nearly everything that is produced, manufactured, or transported, including food and gasoline. How one would
construct a credible methodology for accurately and precisely measuring and accounting for these effects remains, perhaps intentionally,
an unaddressed question.
5. We should reject carbon taxesthey are too blunt of an instrument

Sustainability advocates need to turn away from the anti-urban roots of the environmental movement and turn to a positive, enabling
vision of a 21st century sustainable lifestyle. Instead of punishing people for consuming the "wrong" things let's figure out a way to
reward people for consuming the "right" things. Culture, entertainment, education, physical fitness, "wellness" and even "people
watching" use few material resources and are attractive, positive elements of a sustainable urban society. People enjoy green spaces,
green buildings and the intellectual, social and cultural engagement of the best 21st century cities. These cities can gradually implement
renewable energy, modern waste management, water treatment and sustainable mass transit systems. This will enable people to enjoy a
sustainable life style in a production system that minimizes rather than maximizes environmental impacts. A carbon tax is a blunt and
infeasible policy instrument. Why waste time and effort on an infeasible policy that will never happen? Why not devote time and effort
to building a real partnership between the public and private sector to create a sustainable economy? Let's fund the research, smart grids,
and productive capacity needed to lower the cost and environmental impact of energy. Its time to give up on the carbon tax and do the
real work that will transform the energy base of the world economy.
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Carbon Tax Undesirable: FailsEnforcement Problems

1. Carbon taxes will failspotty enforcement
The figures in Table 4 refer to idealized, textbook implementation of the various policieseven the inefficient ones. In reality, whether
the program is a carbon tax, cap and trade scheme, or some other regime of controls and regulations, there will always be governments
that do not strictly enforce its provisions. Although we are all living on one planet, different regions will be affected in different ways
from climate change as well as from efforts to limit carbon emissions. For example, Russia has much less to lose from global warming
than Egypt, while a return to 1990 emissions levels would imply a much higher loss of potential income for the people of China than the
people of Switzerland. Because of their different circumstances, some countries may opt out of a proposed climate change program
altogether, or (more likely) they will nominally participate while exempting favored sectors. In order to achieve the estimated benefits in
Table 4, the good proposals must be enforced not only a worldwide scale, but also nonstop for centuries. If there is a severe recession
in 2040, for example, and much of the world relaxes its carbon restraints, then a large portion of the net benefits from a good policy
could be forfeited.
2. A carbon tax will hit the poor the hardest and create more abusive tax loopholes as it is implemented
5. A carbon tax is a regressive tax, but increased wealth transfers will likely make it increasingly progressive. Lower income families
spend more of their income on energy than higher income families. The Wall Street Journal explains: The Congressional Budget
OfficeMr. Orszags former roostestimates that the price hikes from a 15% cut in emissions would cost the average household in the
bottom-income quintile about 3.3% of its after-tax income every year. Thats about $680, not including the costs of reduced employment
and output. The three middle quintiles would see their paychecks cut between $880 and $1,500, or 2.9% to 2.7% of income. The rich
would pay 1.7%. Cap and trade is the ideal policy for every Beltway analyst who thinks the tax code is too progressive (all five of them).
It appears that some of the proponents of carbon taxes are some of those five beltway analysts who believe the tax code is too
progressive. They argue in favor of a carbon tax because it will not retard the formation of capital because it applies to everyone. In other
words, since it would be spread over the population without regard to income, carbon tax proponents argue it will not reduce the
incentives for high-income earners to generate wealth and create new jobs. This alleged advantage, however, would never last politically
because a carbon tax will be a visible and ever-increasing new tax. In response to that reality, lawmakers are likely to execute new,
politically popular transfers of wealthall with an eye on limiting the taxs effect on lower-income families. Sales taxes, for example,
could be uniformly applied across the economy, but in practice, sales taxes vary on certain items, in part, to help lower-income
Americans deal with the increased costs imposed by them. Carbon taxes would likely be accompanied by various rebate schemes to
soften the regressive nature of the tax and make it a more progressive tax. This is currently happening with cap and trade proposals. One
plan calls for the government to auction all emission permits and give each citizen a $700 check every year. Another option is to only
give the rebate checks from auction revenues to lower-income citizens. If the government imposes a carbon tax, it is very unlikely that
the tax will remain uniform. In the end, not only will it hit the poor with a disproportionate burden of a carbon cap, but it will create yet
another series of loopholes in the tax code. As history has shown, such a plan will further distort the market, render the tax code even
more complicated, and hide yet another round of handouts to well-connected special interests.
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Carbon Tax Undesirable: FailsPoliticization

1. Even if their models are right, the program risks getting hijacked in the political arena
Many economists favor some form of government penalty on carbon dioxide emissions because of the threat of climate change.
However, the steps in the argumentgoing from computer simulations to a specific, numerical tax on economic activity todayare
riddled with uncertainties. On top of the theoretical difficulties, there is always the risk of politicians relying on politicsrather than
pure scienceto implement the recommended programs. Rather than relying on conjectural models and the good faith of politicians,
economists should instead consider the ability of markets to generate wealth to ease the adaptation process. Given the large uncertainties
in each major step of the case for a carbon tax, we urge economists to reconsider their current support for such a policy.
2. Setting and adjusting the tax rate effectively will fail--politicization

Setting a tax rate at the socially optimal level is hardly an easy task. It can be extremely difficult to come up with a politically acceptable
tax plan due to the difficulty of calculating the total social cost of pollution, and because marginal abatement costs can be grossly uneven
among different firms, industries, and regions. Under the American administrative law system, "delegating authority to fix tax rates to
EPA or a similar state agency might lead to delay and uncertainty similar to that experienced under traditional regulation." Even if
Congress sets the tax rate, "because a political process fixes the tax rate, taxes do not provide the escape from government decisions
inspired by the free market vision." In order for pollution taxes to be effective, the tax rate should be adjusted over time. Whereas
frequent rate revisions may "create uncertainties...that weaken a tax's ability to stimulate innovation," stable tax rates over a long period
of time do not provide enough incentive to innovate and "may delay an appropriate response to changing conditions and new
information about environmental effects."
3. A carbon tax will create a political disasterit will inevitable be politicized

The fifth circle of Carbon Tax Hell contains the political realities. Economist Bruce Yandle coined the term Bootleggers and Baptists
to express a fundamental reality of public affairs: programs and policies are often supported by an alliance of Baptists, whose support
is based on moral fervor, and Bootleggers, who smell profit. The term comes from the many contests over state laws forbidding liquor
sales, which were supported both by those who opposed drinking and those who profited from selling illegal liquor. A carbon tax is
supported by multiple sets of both Bootleggers and Baptists: idealistic environmentalists, crony capitalist subsidy-seekers, investment
banks in quest of trading profits, government spenders who see a new source of revenue and power, and the recipients of the $280
million in foundation money that goes each year to the field of climate change/energy. The tax will not be implemented in the politically
aseptic world of academic modelers, but in the real world of intense political pressures. Its assumed purity will not survive the onslaught.
The problem areas include: Its negative effect on GDP & jobs, especially over the long term; Its regressive nature; Its harm to
energy-intensive industries, including their employees and regions of the country dependent on them to be economic drivers; The
unlikelihood that it would increase the efficiency of taxation, trigger a repeal of other taxes, or be administered in neutral fashion; The
unlikelihood that it would trigger reform of other regulations; The need for complex and improbable international arrangements and
the unlikelihood that China, the most important source of CO2 emissions, would join such a scheme.
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Carbon Tax Undesirable: FailsPoliticization [contd]

4. Offsets and debates over how to deal with the taxs disparate impact risk politicizing the entire process
The idea behind the carbon tax is that by raising the price of fossil fuels, one promotes energy efficiency and, as fossil fuels become
more expensive, renewable energy technologies will become more competitive. I am certain this is true. But few elected officials are
going to advocate higher fossil fuel prices. Moreover, higher energy prices cause people on the lower end of the economic ladder to pay
a higher portion of their income on energy. This is because many of the ways we use energy cannot be reduced and poor people often do
not have access to the technologies of renewable energy and energy efficiency. Gasoline for your car, heat for your home and electricity
for the family refrigerator are often not discretionary but required prerequisites for participation in modern economic life. This is when
the simple elegance of the carbon tax breaks down as the complexity of the real world intrudes on the logic of theory. In order to enact a
tax we would need to devise ways to reduce its impact on poor people or energy-intensive businesses. The Times editorial discusses
these policies, but energy stamps or similar subsidies are far from simple to implement, might stigmatize recipients and would become
easy and obvious political targets.
5. A carbon tax will simply not say neutralpolitical pressures

The idea of revenueneutral progrowth carbon tax reform for the U.S. is arguably a red herring, as it is very unlikely that any national
politically feasible deal will respect revenue neutrality. On lower jurisdictions, note that Governor Jerry Brown wanted to use
Californias capandtrade revenue for highspeed rail,27 while the website for the Regional Greenhouse Gas Initiative (RGGI)which
is the capand trade program for power plants in participating Northeast and MidAtlantic states proudly explains how its revenues
have been spent on renewables, energy efficiency projects, and other green investments. And far from insisting on revenue neutrality,
Washington State Governor Jay Inslee wants to install a new state level capandtrade levy on carbon emissions to fund his $12.2 billion
transportation plan.
6. Politicization means a carbon tax will fail, even if it should work in theory
This concept was given a theoretical economic structure by Alfred Pigou, one of the giants of economic intellectual history, so taxes
intended to discourage bads are called Pigovian Taxes. The definition, per Wikipedia, is: A tax applied to a market activity that
generates negative externalities. The tax is intended to correct the market outcome. In the presence of negative externalities, the social
cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may
lead to over-consumption of the product. A Pigovian tax equal to the negative externality is thought to correct the market outcome back
to efficiency. As the economics profession (including Pigou himself) realizes, however, it is difficult to develop this theory into
workable practical applications because of the uncertainties of assessing the extent of the negative externalities and the appropriate level
of taxation. Economist Bruce Yandle observed: Put simply, [Pigou] did not believe the politicians could get the calculations right.
Instead of making things better, the chances were just as good that things would be made worse.
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Carbon Tax Undesirable: FailsAnswers to Efficient

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Their economic efficiency arguments are purely theoreticalthey do not work in the real world
Attaching a price to carbon emissions is, theoretically, the most economically efficient way to reduce emissions. Economic theory tells
us that demand curves slope downwards, which means that as the cost of doing almost anything goes up, people will tend to do less of it.
Carbon pricing is theoretically more efficient than regulatory strategies for reducing emissionsfor example, banning particular
inefficient productsbecause it does not discriminate between different sources of emissions, and it allows market forces to identify the
areas of economic activity where GHG use can be reduced most efficiently. However, the gap between theoretical predictions about the
likely effect of a general policy approach and the real-world consequences of policies as they are designed and implemented is often
large. This has certainly been true in the case of carbon pricing policies. Since Kyoto was signed in 1997, a number of jurisdictions have
implemented policies based on carbon pricing, some of which have been in place for many years. As a result, we can move beyond
theoretical arguments about the likely impact of carbon pricing and move on to empirical examinations of what has happened when
governments have attempted to attach a price to carbon. This paper uses a case study approach to examine the question and to assess the
extent to which ambitious carbon reduction policies have achieved their stated objective to significantly reduce GHG emissions without
causing severe negative consequences for economic performance. By and large, our review suggests that the international experience
with carbon pricing has not been a success.
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Carbon Tax Undesirable: Fossil Fuel Use / Gas Shift

1. A carbon tax actually benefits fossil fuel producerswill spur a shift towards natural gas
As the carbon-tax bandwagon gathers steam, some interesting enthusiasts are jumping on board. Last week, six major European oil and
gas companies sent the U.N. a letter of support because, according to a New York Times editorial, they realize something must be
done. But who exactly is steering this bandwagon, and who is being taken for a ride? Big energy companies win big from a carbon tax.
Whats good for business is often good for society as well, and industry support for a policy is by no means an indictment per se. But
here those gains would come at the expense of low-income households and long-term economic growth, while failing to achieve the
environmental objectives set out to justify a tax in the first place. How do companies that produce fossil fuels benefit from a tax on fossil
fuels? First, they dont end up paying it. Most economists expect nearly the entire cost increase to be passed directly on to consumers
through higher prices. Second, for many fossil-fuel producers, the tax will increase rather than decrease their business. The largest
energy companies are traditionally focused on oil and natural gas. Coal, representing 30 percent of global energy supply and the largest
primary fuel for generating electricity, would be badly damaged by a tax. The biggest beneficiary of the damage would be natural gas,
which emits less carbon dioxide and would thus face a lower tax. If higher oil prices push consumers away from gasoline and toward
electric cars, the electricity for those cars can come from natural gas as well.
2. Carbon taxes will increase fossil fuel usewe are able to pay a fee that excuses the damage we do the
environment
Passing costs on to others while maintainingor even growingsales will minimize any effects on the industry. Much of the benefit to
fossil-fuel producers from a carbon tax will come from a third factor: a fine is a price. That insight is the title of a paper by Uri Gneezy
and Aldo Rustichini analyzing changes in parent behavior at preschools that imposed fines for late pick-ups. Counterintuitively, fines
made parents more likely to arrive late. The sense of guilt that had once motivated them to arrive on time was replaced by a sense of
permission to pay for the extra minutes of child care. For energy producers, and all users of fossil fuels, a similar dynamic is at work. If a
carbon tax is established at a price that economists and policymakers agree compensates society for the potential dangers of climate
change, then anyone who wants to pay the price is implicitly welcome to emit the carbon dioxide. The result would presumably not be
an increase in emissions as it was with increased late pick-ups. But paying the tax buys legal, economic, and moral permission for the
very activity that the tax is designed to discourage. Energy producers get this benefit without even bearing the burden of the tax.
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Carbon Tax Undesirable: Free Markets

1. Carbon taxes are unnecessary and unproductive intervention into the free market
Even if one concludes that carbon dioxide and other greenhouse gases are leading to increased temperaturesand there is robust debate
and far from a public consensus on the magnitude of man-made warming, particularly among conservativesa carbon tax would be
counterproductive because it would do next to nothing to lower global temperature, while it would harm American manufacturing
competitiveness, create a new revenue stream based on behavior modification, and harm low-income Americans. Free-market
conservatives in particular should denounce a new carbon tax as more meddling by the federal government. Specifically, they should
urge Congress and the President to: Categorically reject a new carbon tax, which would have little environmental impact, harm
manufacturing, be another tax seeking to control behavior, and disproportionately harm the poor; Work to stop EPA regulations of
greenhouse gases, which will wreak havoc on the economy and have no appreciable impact on the stated environmental goal of reducing
global GHGs; and Work toward tax reform that results in a system that will raise the revenue to fund necessary government operations in
ways that cause the least possible economic damage and not pick winners and losers with preferential or punitive policies. A carbon tax
is in essence a perpetuation of a disastrous policy of picking winners and losers from Washington instead of allowing families to choose
which energy sources work best for them. From ethanol subsidies to grants awarded to now-defunct solar manufacturers like Solyndra,
these policies have increased costs to American families and wasted taxpayer dollars. Energy, like other sectors, should not become a
playground for connected lobbyists to collude with government for special treatment. The bottom line in energy is that supplies can be
delivered and new supplies created through the private sector rather than through mandates, regulations, taxes, and subsidies ordered by
government.
2. The claim that a carbon tax is a market solution is simply false

Robert P. Murphy, Senior Economist, Cato Carbon Tax Critique, Part 2: The Economics, Institute for Energy Research, 10815,
http://instituteforenergyresearch.org/analysis/cato-carbon-tax-critique-part-2-the-economics/, accessed 1-10-16.
Especially among the small but vocal group of analysts urging carbon taxes to a conservative and libertarian audience, there is a
rhetorical technique of casting a carbon tax as a market solution that reflects libertarian principles. The idea here is that greenhouse gas
emissions are a negative externality and represent a violation of the property rights of third parties. Therefore, so the claim goes,
imposing a federal carbon tax is just a way of making companies pay the full cost of their actions. What kind of libertarian could oppose
that? But hold on a second. This market failure analysis is sorely lacking. We show this in our CATO paper by drawing an analogy to
a historical episode where property rights were lacking and resulted in a clear market failure: [E]ven on its own terms, a carbon tax is
hardly a genuine market solution analogous to other introductions of property rights. The classic tragedy of the commons involved
animals overgrazing on English pastureland, and this problem was solved by establishing private property in real estate (enforced at low
costs via barbed wire fencing). But if we were to implement a market solution in the spirit of a carbon tax, the English government
would have fined only English ranchers and shepherds a certain number of guineas for every acreyear of grazing by their animals, with
that fine periodically adjusted based on the whims of Parliament, and where any nonEnglish rancher or farmer could let his animals
graze on English pastureland without paying anything to the government. (No fences would be allowed to restrict foreign ranchers, who
fell outside the jurisdiction of the English government, from coming into England and grazing on the land that the English were trying to
preserve for the future.) Would this be a market solution to the original tragedy of the commons? [Murphy, Michaels, and
Knappenberger p. 25] In other words, it is hardly fixing a missing market in atmospheric levels of CO2 by giving political officials in
DC the ability to set a tax rate on US emissions. If we applied this attempted justification of a carbon tax to other areas, it would be
obvious that it was merely a political program with its own suite of problems, rather than a market solution.
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Carbon Tax Undesirable: Free Markets [contd]

3. It is highly disingenuous to claim that carbon taxes are a market-based solution
PAPER n. 33, Cato Institute, 9415, p. 25-26.
There are several flaws with such a pitch. In the first place, even on its own terms, a carbon tax is hardly a genuine market solution
analogous to other introductions of property rights. The classic tragedy of the commons involved animals overgrazing on English
pastureland, and this problem was solved by establishing private property in real estate (enforced at low costs via barbed wire fencing).
But if we were to implement a market solution in the spirit of a carbon tax, the English government would have fined only English
ranchers and shepherds a certain number of guineas for every acreyear of grazing by their animals, with that fine periodically adjusted
based on the whims of Parliament, and where any nonEnglish rancher or farmer could let his animals graze on English pastureland
without paying anything to the government. (No fences would be allowed to restrict foreign ranchers, who fell outside the jurisdiction of
the English government, from coming into England and grazing on the land that the English were trying to preserve for the future.)
Would this be a market solution to the original tragedy of the commons? Another problem with the idea of a carbontaxforregulation
swap is that progressive environmentalists would be, on their own terms, foolish to go along with such a bargain. David Roberts, in a
Vox interview with Jerry Taylor, gets the Niskanen Center president to estimate that the true social cost of carbon dioxide emissions
(including the fat tails catastrophic risks described by Weitzman and others that are increasingly inappropriate) ranges anywhere
from, say, $70 to $80 a ton to a couple hundred dollars a ton, and Taylor further agrees with Roberts that any politically feasible U.S.
carbon tax will be almost certainly well south of $70/ton. Why then would any progressive give up direct regulatory tools, if a U.S.
carbon taxespecially in the beginning, when much of the world continues to emit without constraintwill be nowhere near the level
needed to achieve the (stipulated) emission cutbacks for a 2C goal, let alone a more aggressive goal such as 350ppm? In the interview,
Taylor answers that even a modest carbon tax will achieve more emission cutbacks than particular regulatory interventions, but how
would that satisfy someone worried about catastrophic risks to future generations? It would simply underscore the need to pursue further
commandandcontrol regulations in conjunction with the (inadequate) carbon tax. The idea that progressive environmentalists would
want a carbon tax to supplement direct mandates is clear as day: it is what they are announcing to the world. For just one example, the
group Clean Energy Canada in early 2015 published a pamphlet, How to Adopt a Winning Carbon Price: Top Ten Takeaways from
Interviews with the Architects of British Columbias Carbon Tax. Here is takeaway #8: A carbon tax cant do everything; it needs to
be just one component of a full suite of climate policies. (A post on the U.S. progressive website grist.com favorably covered the
release of the pamphlet, where the authorthe same David Robertscommented, I certainly hope [carbon] tax advocates take heed of
No. 8!) We will return to the celebrated case of B.C.s carbon later in this study, but for now it serves to make the point that the
proposal to replace topdown regulations with a carbon tax is a fantasy. Progressives arent even agreeing to that in principle. How, then,
can we expect them to go along with such a deal in practice?
4. Carbon taxes are social engineering at its worst and should be rejected
The proposed carbon tax does not even qualify as a Pigovian tax. In economic theory, such taxes are designed to offset negative
spillovers. The carbon tax is not based on any decent estimate of the magnitude of these spillovers and does not take account of positive
downstream benefits of cheap energy. In the absence of serious estimates, it loses its intellectual fig-leaf. When viewed as an instrument
of central planning, the defects of the carbon tax become even more apparent. It would cause massive gaming of the system, as in the
stories from the Soviet Union about the manner in which quotas were gamed. And the enterprise suffers from the fatal conceit that
central planners can and should guide an economy. Richard Lindzen said: Future generations will wonder in bemused amazement that
the early 21st centurys developed world went into hysterical panic over a globally averaged temperature increase of a few tenths of a
degree, and, on the basis of gross exaggerations of highly uncertain computer projections combined into implausible chains of inference,
proceeded to contemplate a roll-back of the industrial age. The situation is even worse than Lindzen contemplated, because he was
focusing on the question marks surrounding the climate science and its models. When the added uncertainties and errors inherent in the
economic analyses are added in, the irrationality of the policy response is even more obvious. Lindzen also erred in another respect.
Forces of greed and ideology are always at work in human affairs, and it is not surprising that some would contemplate rolling back the
successes of the Industrial Age out of their own convictions or for their own profit. Considering the powerful combinations of
Bootleggers and Baptists at work to whip up concern, the power of the assault is not really amazing. The real question is whether our
democratic republic is vigorous enough to compel a return to rationality and to recommit to the continuing betterment of humanitys lot
by pursuing cheap energy.
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Carbon Tax Undesirable: Multiwarrant / General

1. Carbon taxes are undesirablemultiple reasons
Summers makes a clear, concise, but unpersuasive case for a carbon tax. The holes in the argument are not his doing but rather arise
from the thesis he propounds. The case for a carbon tax fails because: * American energy is not undertaxed or under-regulated. * An
underperforming economy and anti-market policies already restrict oil consumption. * Policymakers do not know the sign (positive or
negative), much less the monetary impact, of an incremental ton of CO2, so even a small carbon tax could do more harm than good. *
Carbon taxes are regressive and would be piled on top of existing taxes and regulations rather than replace them. * Even a very
aggressive carbon tax imposing trillion-dollar costs on the economy would have no discernible climate impact for decades to come. *
Consumers are finally getting a break from high gasoline prices. Having endured years of energy-price windfall losses, they should now
be allowed to enjoy windfall gains.
2. Carbon tax advocacy is simply a shell gameit will not work

Support for a carbon tax has become the height of fashion among some on the right, and an express pass to "strange new respect" from
the left. It even earned former congressman Bob Inglis (a Republican from South Carolina) the 2015 JFK Profile in Courage Award.
Supposedly, the tax is at once a free-market economist's efficient approach to combatting climate change, a savvy fiscal reform for
promoting economic growth, and a statesman-like grand bargain poised to break through the political gridlock. But as with most fads, it
makes little sense when scrutinized closely. Simply put, the carbon tax is a shell game. The range of designs, prices, rationales, and
claimed benefits varies so widely even within many individual arguments for the tax that assessing the actual validity of most
discrete proposals becomes nearly impossible. The insubstantial effect on emissions gets obscured by discussions of the fiscal benefits.
The negative fiscal effects get offset by claims of environmental efficacy. The tax's simplicity and practicality are touted, even as new
complexity is introduced to address each flaw. The same revenues are rhetorically spent to achieve multiple ends, even as the different
promises made to each constituency would be rejected by the others. If we grabbed the wrists of carbon-tax advocates and demanded
they turn over the shells all at once, we would find there was never a marble to begin with. Implementing a US Carbon Tax, a book
released on Earth Day by the American Enterprise Institute, the Brookings Institution, the International Monetary Fund, and Resources
for the Future, provides a particularly transparent example. Chapter 4, "Carbon Taxes to Achieve Emissions Targets," studies carbon
taxes that would cut U.S. emissions in half by 2050 and finds an average price of $35 per ton of carbon dioxide (CO2) in 2020, rising to
$163 in the final year. Chapter 5, "Macroeconomic Effects of Carbon Taxes," studies the impact of carbon taxes on the economy but
reviews taxes with an average starting value below $20 per ton of CO2 and a 2050 value averaging less than $90 per ton. A "carbon tax"
helps the environment, and a "carbon tax" has manageable economic effects but the two are not at all the same tax. The problem with
carbon taxes is not a function of what you make of climate science or of Congress. Even stipulating that the conclusions of the United
Nations Intergovernmental Panel on Climate Change (IPCC) are flawless and that the political process would not distort a hypothetical
policy proposal (two very big assumptions, to be sure), a carbon tax is not good policy. By reviewing the capacity of a carbon tax to
tackle the threat of climate change, its potential economic efficiency in doing so, its fiscal characteristics, and the variety of purely
political arguments made in its favor, we can see the winning strategy is to walk quickly away from the table.
3. A carbon tax will hurt the poor, is enormously unpopular

CHRISTIAN SCIENCE MONITOR, staff editorial, Al Gores Inconvenient Tax, 7507, p. 8.
This "carbon tax" would, of course, raise the price of gasoline and home heating/cooling. And it would put the burden of generating the
same level of federal revenues on consumers while reducing the tax burden on labor and capital (workers and employers). Unless the
poor get a break on this consumption tax, it will hit them harder than wealthier folks. No wonder then that Mr. Gore waited until March
to really push this extreme makeover of the US tax system aimed at achieving a rapid reduction in oil and coal use with a fee on
greenhouse-gas emissions. No wonder that no presidential candidate endorses it, especially with gas prices hovering around $3 a gallon.
(Polls show that two-thirds of Americans don't want to pay more at the pump, just as they don't prefer more slowly.) And no wonder a
carbon tax is not even suggested in the seven-point pledge that everyone who watches the Live Earth broadcast will be asked to sign.
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Carbon Tax Undesirable: Multiwarrant / General [contd]

4. Carbon taxes hurt heavy industry and the poor
Finally, the tax favors knowledge-based work at the expense of heavy industry. The fossil-fuel sector and those manufacturing industries
that rely on low-cost energy, which have been responsible for so much recent economic growth, would bear the brunt of the burden.
Generally speaking, labor-intensive energy sources would lose out to capital-intensive ones. Social media start-ups would win;
agricultural workers would lose. On each of these dimensions, the regressivity as measured by tax dollars paid also understates the full
effect, which by design includes a reduction in energy consumed. While less frequently subjected to formal analysis, one might presume
it is the struggling family rather than the wealthy one that is likely to turn the thermostat down in response to rising energy prices. One
might also presume it is a drive to visit the grandparents in Dayton that is more likely to be forgone than a private flight to Davos. Freemarket analyses rarely account for these costs because the price system and a reliance on expressed preferences are regarded as the best
mechanism for allocating scarce goods. But here the scarcity is artificially imposed by government, in pursuit of objectives its
proponents concede it will not achieve. Under those conditions, shrugging off the fact that the poor are the "least-cost avoiders" and thus
should be the ones to cut back on energy use is a morally questionable proposition doubly so if that logic is not extended on the
international stage to impositions on developing countries. When evaluated as a source of revenue, then, a carbon tax is a highly
distortionary consumption tax whose burden skews heavily toward the rural, the industrial, and the poor for the benefit of wealthy, urban
symbol manipulators. But its case is weaker still, because even if perfectly distributed in society, carbon would be a poor choice of tax
base.
5. Carbon taxes double the burden on fossil fuelsthey are already heavily regulated
7) As we already have a vast array of regulations which are aimed at reducing carbon emissions, new carbon taxes would represent
double-taxation. Youre already paying carbon taxes in the additional costs of new vehicles with higher fuel emission standards, more
expensive appliances that aim to conserve energy, renewable energy standards that raise your cost of electricity, etc. Nobody in the
environmental movement is talking about trading these rules and regulations for a carbon tax.
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Carbon Tax Undesirable: Political Opposition

1. The disproportional effects of even revenue-neutral schemes substantially increases the threat of derailment
Additionally, our case studies suggest that it is not necessarily sufficient for a carbon pricing plan to be revenue-neutral across an entire
jurisdiction. If a specific region or group of individuals perceives itself to be disproportionately harmed by the policy, the result is likely
to be fierce, concentrated political opposition that may successfully derail implementation. The proposed federal Green Shift in Canada
provides a clear example. Strong regional opposition developed in Western Canada, where large numbers of residents and local
politicians were convinced that it would result in economic harm for that region. Similarly, opposition to the effort to enact cap and trade
legislation at the federal level in the United States had a partially regional character, as politicians in key states where there was
particular concern about the impact on local economies led the opposition. This phenomenon was most clearly illustrated when a
Democratic candidate for Senate in the state of West Virginia bucked his own party leadership and strongly opposed the legislation,
actually shooting a bullet through a copy of the legislation in a campaign commercial. In British Columbia, significant opposition to the
carbon tax actually developed on the left wing of the political spectrum, as New Democratic Politicians argued that the tax might
disproportionately disadvantage low-income residents. In the case of British Columbia, this opposition was eventually overcome, yet it is
nonetheless significant that this argument constituted one of the major sources of political opposition to the law. These case studies
illustrate the importance of recognizing that carbon taxes will usually not be revenue neutral for each individual, business or geographic
region, meaning some people and businesses may be disproportionately harmed unless compensation schemes are exquisitely well
designed. This can lead to fierce political opposition from those most harmed by the carbon tax. This is particularly true for energyintensive industries and low-income citizens who tend to spend a greater share of their income on the cost of energy.
2. Resistance to carbon taxes will be strong because people fear the economic consequences
The case studies paint a somewhat bleak picture for politicians who wish to embark upon carbon pricing in North America. Of the major
initiatives examined in this report, only the BC Carbon Tax appears to have been implemented effectively and seems to have little
prospect of repeal in the immediate future. On the other hand, the two regional cap and trade initiatives, the RGGI and WCI have seen
key members withdraw, while federal efforts to implement carbon pricing in both countries led to a significant political backlash and
contributed to the defeat of the politicians who supported them. Across North America, we have seen that the strong perception among
the electorate that carbon pricing will harm economic performance has, on several occasions, generated fierce political resistance
movements that have ultimately been successful at frustrating the ambitious plans of carbon pricing supporters.
3. Carbon tax would be deeply unpopular

Fred Magdoff, Professor Emeritus, Plant and Soil Science, University of Vermont and John Bellamy Foster, Professor, Sociology,
University of Oregon, What Every Environmentalist Needs to Know about Capitalism, MONTHLY REVIEW v. 61 n. 10, 310,
http://monthlyreview.org/2010/03/01/what-every-environmentalist-needs-to-know-about-capitalism, accessed 1-1-16.
A carbon tax of the kind proposed by James Hansen, in which 100 percent of the dividends go back to the public, thereby encouraging
conservation while placing the burden on those with the largest carbon footprints and the most wealth, could be instituted. New coalfired plants (without sequestration) could be blocked and existing ones closed down. At the world level, contraction and convergence in
carbon emissions could be promoted, moving to uniform world per capita emissions, with cutbacks far deeper in the rich countries with
large per capita carbon footprints. The problem is that very powerful forces are strongly opposed to these measures. Hence, such reforms
remain at best limited, allowed a marginal existence only insofar as they do not interfere with the basic accumulation drive of the system.
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Carbon Tax Undesirable: Political Opposition [contd]

4. Carbon taxes are politically radioactive
There is a growing consensus among economists around the world that a carbon tax is the best way to combat global warming, and there
are prominent backers across the political spectrum, from N. Gregory Mankiw, former chairman of the Bush administration's Council on
Economic Advisors, and former Federal Reserve Chairman Alan Greenspan to former Vice President Al Gore and Sierra Club head Carl
Pope. Yet the political consensus is going in a very different direction. European leaders are pushing hard for the United States and other
countries to join their failed carbon-trading scheme, and there are no fewer than five bills before Congress that would impose a federal
cap-and-trade system. On the other side, there is just one lonely bill in the House, from Rep. Pete Stark (D-Fremont), to impose a carbon
tax, and it's not expected to go far. The obvious reason is that, for voters, taxes are radioactive, while carbon trading sounds like
something that just affects utilities and big corporations. The many green politicians stumping for cap-and-trade seldom point out that
such a system would result in higher and less predictable power bills. Ironically, even though a carbon tax could cost voters less, capand-trade is being sold as the more consumer-friendly approach.
5. Fossil fuel lobbies will fight a carbon tax

Despite the mounting dangers, most fossil fuel lobbies remain determined to prevent a carbon tax. They claim such a tax would lead to
carbon leakage, where highly polluting industries move to countries without one. However, by 2013 some form of a carbon tax will be
in place in 33 countries. Regardless, carbon tax advocates have proposed a fee on energy imports from countries without a carbon tax
to equalize the price and prevent carbon leakage.
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Carbon Tax Undesirable: Regional Disparities

1. The economic effects of a carbon tax will vary in different parts of the country
Changes in energy prices would vary by region, depending on the source of electric power (and its carbon content) used in the region.
Regions of the country that consume relatively greater amounts of fossil fuels, and coal in particular, could feel a greater price increase
from the introduction of a tax on carbon. However, other regions of the country could bear much of the change in cost because electricity
generated and goods manufactured with fossil fuels are transported to consumers across great distances.
2. A carbon tax will have disparate effects on a regional basis

A carbon tax is also regressive along dimensions besides income, benefiting those already thriving in the current economy at the expense
of those facing the greatest struggles. For instance, while the regional distortion is far less dramatic than the income distortion, a tax
would fall disproportionately on the South, Midwest, and Appalachia as compared to the Northeast, Northwest, and California. At least
as important, within any given region such a tax would be biased substantially in favor of cities at the expense of suburban and rural
communities. Urban living and working spaces are smaller, requiring less heating and lighting. They are closer together, requiring less
travel. Travel that does occur is more likely to occur via public transit.
3. The tax effects are not spread evenlygeographic disparities

8. Just because a proposal is budget neutral for the government does not mean it is budget neutral for American families. Carbon
taxes or cap and trade programs will transfer wealth from rural areas, where people drive more and use more energy, to more densely
populated urban areas. Not coincidentally, many urban and Northeastern politicians favor a cap and trade program or carbon taxes. Also,
carbon taxes will disproportionally harm states that generate the majority of their electricity from coal-fired power plants. These states
tend to be more rural states.
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Carbon Tax Undesirable: Rent-Seeking

1. Carbon taxes are subject to political manipulationunduly threaten domestic fossil fuel production
Creating an entirely new federal revenue stream does not usually end up well for taxpayers, even if its initial goals are modest. Data
from the Tax Foundation show that the marginal income tax rate, for example, was 1 percent for married filers making less than
$448,759 per year in 1914 (adjusted for inflation). The highest marginal rate at the time was 7 percent. Over the years, the highest
marginal rate was raised to nearly 70 percent as recently as 1979 and 91 percent in 1963. Currently, the highest bracket is 35 percent,
and the lowest bracket is 10 percent. Reducing marginal income tax rates is a great way to encourage growth and prosperity, as
Presidents as diverse as Ronald Reagan and John Kennedy have recognized. Some economists eager to reduce taxes and encourage
economic growth have thought that revenue from a new carbon tax could be used to reduce other harmful taxes on capital and
investment. But because the carbon tax hits the poor disproportionally, it is likely that revenue from the tax will be used to alleviate its
impact on the poor or for some other purpose rather than to cut other taxes in an economically simulative way. The Heritage Foundation
has published the principles for tax reform and has noted that, above all, [t]axes should raise the revenue to fund necessary government
operations in ways that cause the least possible economic damage and that government should avoid picking winners and losers with
preferential or punitive policies. While some have asserted that they can be agnostic about whether human activity is contributing
significantly to global warming and still want to tax carbon, choosing to place a tax on carbon is an endorsement of the theory that manmade emissions of GHGs have a significantly harmful effect on the environment. In effect, such backers of the carbon tax would treat
using fossil fuel resources to heat or cool your home, turn on your lights, drive your car, and charge your cellular phone the same as they
would treat using disfavored goods such as alcohol and cigarettes. Using the tax code to discourage behavior has been encouraged by
NFIB v. Sebelius, the health care case in which the Supreme Court held that the federal government has broad authority to tax, including
to compel behavior. Some localities have already imposed taxes on plastic bags and soft drinks. Conservatives would be on a more solid
foundation advocating for a simplified tax code whose purpose is to raise revenue, not to influence behavior. At least among otherwise
conservative economists, the argument is that the carbon tax should capture the costs of externalities. Considering that the field of
climate science is far from settled, the external costs of GHGs, if any, are very unclear, and the tax rate may need to change. Such
uncertainty will undoubtedly hamper investment in carbon resources even more, with considerable uncertainty and the prospect that
policymakers will make polluters (what liberals call those who develop and use fossil fuel resources) pay and reduce other taxes or
spend increased revenues. Such uncertainty and the likelihood of future gaming of the system would make it difficult to exploit our
world-leading fossil fuel resources.
2. Rent-seeking will happen and magnify the negative effects of the taxEuropean and Canadian experience
proves
14. Real world experience counsels against a carbon tax. Ken Green, a former supporter of a revenue-neutral carbon tax, changed his
mind because of political and economic realities. Mr. Green writes: I previously felt that a revenue-neutral carbon tax was a good idea,
because it would be both effective and could even be economically beneficial. But three developments have caused me to retract my
support. First, rising energy costs have already imposed a huge carbon tax with little GHG reduction. This suggests that the elasticity of
energy use could be lower than prior estimates, meaning it would be a useless gesture. Second, as implementations of carbon taxes in
Europe and Canada have demonstrated, governments simply cannot implement such tax systems without sucking up some of the
revenue, and using the rest to benefit crony-capitalists and steer money to favored constituencies. And finally, because using biofuels
such as ethanol would let people save on carbon taxes, demand for such fuels will grow, only compounding the environmental and
nutritional mischief they cause.
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Carbon Tax Undesirable: Rent-Seeking [contd]

3. The tax will not stay revenue-neutralrent seeking is politically inevitable
3. Politicians like to reward special interest groups with new tax revenues. When politicians have large amounts of tax dollars at their
disposal, they tend to spend it on projects that reward special interest groups. A carbon tax would likely generate over $1 trillion in new
revenue. Much of this revenue would likely be spent on inefficient pork projects. The proposed cap and trade schemes contain
hundreds of billions of dollars for special interests. The recession has spurred additional calls for hundreds of billions of dollars in
additional spending to create green jobs. For example, the Center for American Progress is calling on Congress to spend $100 billion
to create two million green jobs and the Apollo Alliance wants Congress to spend $500 billion to create five million green jobs. If a
carbon tax were in place, lawmakers would almost certainly divert resources to green job subsidies or other similar programs, rather
than back into taxpayers wallets.
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Carbon Tax Undesirable: Sovereignty Concerns / WTO

1. Carbon taxes outsource our tax policy to UN bureaucrats
6) Carbon taxes would put a share (potentially a large share) of the U.S. tax system under the influence of bureaucrat-scientists at the
U.N., who gin up more and more scary scenarios in order to justify their existence. Climate scare-mongering by the IPCC is a one-way
ratchet: things are always worse than we projected. You can guarantee that there would be steady pressure to tax carbon at ever-higher
rates (and transfer some of that booty to developing countries!) every time a new report of the United Nations Intergovernmental Panel
on Climate Change comes out. Get ready to hear the consensus of scientists now feels the carbon tax is too low every few years. Do
we really want the science of climate change as developed by the United Nations and interpreted by the EPA setting our tax rates?
2. Carbon taxes risk trade protectionismhurts the economy and our trading partners
12. Carbon taxes will lead to calls for trade protectionism. Carbon taxes will lead to reduced economic competitiveness. In turn,
organized labor will likely call for new barriers to trade. For example, a top priority for the United Steelworkers is a border adjustment
to penalize the steel imports from countries that do not curb their greenhouse gas emissions. Increased U.S. trade protectionism will
almost certainly lead to greater trade protectionism worldwide that will further harm the American economy and all of Americas trading
partners.
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Carbon Tax Undesirable: WarmingTopshelf

1. A carbon tax will only slow the economy while doing little to address climate change
The economic gains being made now have the potential to be long-lasting; the United States has the largest reserves of fossil fuelsoil,
coal, and natural gasin the world. (See Table 1.) These gains, however, are threatened by unfriendly energy policy from Washington.
President Barack Obama and his allies in Congress continue to block fuel production on federal lands and offshore, have stopped a
pipeline project that would increase North Americansourced petroleum products, are severely limiting coal production, and continue to
allow the Environmental Protection Agency to regulate carbon dioxide (CO2). The left has argued for decades that using fossil fuels is
bad for the country. Initially, their concerns involved direct public health concerns such as oil spills, mercury, and other toxic pollutants.
Their attack on fossil fuels has increased in recent years because fossil fuels are by far the biggest contributor to U.S. greenhouse gas
emissions (GHGs), thought by some to lead to global warming. To limit GHG emissions, President Obama pushed a cap-and-trade
energy bill in the 111th Congress that passed the House but was halted in the Senate. The President is now moving full speed ahead with
regulation of GHGs by the Environmental Protection Agency (EPA) under the Clean Air Act. Although cap-and-trade was rejected by
the Senate and the American people as a new energy tax, some have championed the idea of a new carbon tax, with arguments aimed at
conservatives (it can be revenue neutral) and liberals (it can help the environment) alike. A new federal carbon tax would likely fail to
achieve either goal while further slowing Americas recovery.
2. A domestic carbon tax will have no meaningful effect on climate change

9. Domestic carbon taxes, even in the best case, can only produce marginal impacts on climate. In 2006, China surpassed the United
States as the worlds largest emitter of carbon dioxide.[ But the difference in emission growth rates is striking. According to data from
the Global Carbon Project, from 2000 through 2007, global total greenhouse gas emissions increased 26 percent. During that same
period, Chinas carbon dioxide emissions increased 98 percent, Indias increased 36 percent and Russias increased 10 percent. Carbon
dioxide emissions in the United States increased by three percent from 2000 through 2007. These data are displayed in the graphic
below: [graph omitted]. As time goes on, the United States will emit a smaller and smaller share of the worlds total greenhouse gas
emissions, which makes unilateral efforts such as a domestic carbon taxan ineffective way to influence climate. If the United States
were to completely cease using fossil fuels, the increase from the rest of the world would replace U.S. emissions in less than eight years.
If we reduced the carbon dioxide emissions from the transportation sector to zero, the rest of the world would replace those emissions in
less than two years. Increases in worldwide carbon dioxide emissions are driven by developing economies, not the United States.
3. The effects of warming do not justify significant emissions cuts

Future economic damages from carbon dioxide emissions can only be estimated in conjunction with forecasts of climate change. But
recent history shows those forecasts are in flux, with an increasing number of forecasts of less warming appearing in the scientific
literature in the last four years. Additionally, we show some rather stark evidence that the family of models used by the U.N.s
Intergovernmental Panel on Climate Change (IPCC) are experiencing a profound failure that greatly reduces their forecast utility.
Ironically, the latest U.N. Intergovernmental Panel on Climate Change (IPCC) report indicated that a popular climate target cannot be
justified in cost/benefit terms. Specifically, in the middleoftheroad scenarios, the economic compliance costs of limiting global
warming to 2 degrees Celsius would likely be higher than the climate change damages that such a cap would avoid. In other words, the
U.N.s own report shows that aggressive emission cutbackseven if achieved through an efficient carbon taxwould probably cause
more harm than good.
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Carbon Tax Undesirable: WarmingCalibration Problems

1. Hard to calculate a climate-effective taxwe do not understand sinks
Unlike some other negative externalities, the impact of a given quantity of GHG emissions is crucially dependent on the concentration
already in the atmosphere. Therefore, an efficient carbon tax regime must incorporate projections of future GHG concentrations as a
function both of time and the taxes themselves. Yet these projections are not as straightforward as one might think. A major source of
uncertainty concerns carbon sinks, such as the oceans. As humans pump tons of carbon dioxide into the atmosphere, some of it is
absorbed by the oceans. This mitigates the growth in atmospheric GHG concentrations, and hence reduces the projected damages from a
given amount of emissions. The problem for modelers is that the oceans are vast but finite sinks. In response to critics of his earlier
versions, Nordhaus explicitly adopted a three reservoir model of carbon flows in his 1999 and subsequent versions of DICE (Nordhaus
and Boyer 2000, p. 57). By its very nature, this particular model cannot be simply calibrated with historical measurements on carbon
concentrations, because the oceans are not yet saturated. The critics of the earlier versions of Nordhaus model certainly had a point: It
would be too optimistic to rely solely on historical correlations of emissions with atmospheric concentrations, because once the oceans
fill up, further emissions will cause atmospheric concentrations to grow at a faster rate than they had in the past. On the other hand,
once we leave the realm of empirical trends, the projections become quite tenuous. The current parameterization of DICEs three
reservoir model of carbon flow may be revised significantly in the coming years.
2. Hard to calibrate a carbon tax because we do not understand feedback effects

The next step in Nordhaus argumentnamely, that higher GHG concentrations will lead to higher global temperatures, what is termed
climate sensitivityis also fraught with uncertainty once we attempt specific numerical estimates. The major controversy here is how to
handle feedback effects. There is truly a consensus on the direct temperature increase from higher CO2 concentrations. If these
concentrations double (relative to preindustrial times, with a benchmark year of 1750), global mean surface temperatures will rise around
1.2C (IPCC 2007, p. 631). Yet the IPCC AR4 assessment says that a doubling will lead to an equilibrium (i.e. long run) temperature
increase that is likely in the range of 2 to 4.5C, with a best guess of 3C (IPCC 2007, p. 799). The range of estimates is significantly
higher than the direct effect, because it is assumed that temperature rises themselves will set into motion further warming. For example,
as the earth warms due to GHG emissions, the atmosphere will hold more water vapor, which in turn will enhance the greenhouse effect.
Note that it is this most recent best guess of 3C that Nordhaus plugs into DICE-2007, in order to compute the optimal carbon tax profile.
The relatively large spread among estimates of this climate sensitivity parameter is due to honest disagreements over how to model such
feedback effects.
3. Carbon tax wont solvetoo hard to adjust to hit an emissions cap

And finally, Congress isn't smart enough to tax carbon. Carbon tax proponents argue that people buy less of things that cost more. If
carbon emissions harm the environment, tax enthusiasts reason that they can get people to emit less carbon by raising the price through a
tax. Carbon-tax enthusiasts are vague about how much of a tax to impose. That detail matters a great deal. HOW MUCH harm does
releasing the carbon in a gallon of gasoline cause? No one knows and no one seriously believes an accurate assessment is possible. Set
the tax too high and we'll use too little of carbon-based fuels; too low and we'll use too much. We've tried allowing politicians to set
energy prices before. The energy price controls of the 1970s produced long lines at gasoline stations, natural gas shortages, and Jimmy
Carter in a cardigan. We can't afford any of those experiences again. Carbon emissions may be bad for the environment. If they are,
cutting carbon emissions is not something to be done on the backs of the poor through a regressive tax nor should it be done by sending
the economy into a tailspin through a tax on everything.
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Carbon Tax Undesirable: WarmingCalibration Problems [contd]

4. They have an enormous solvency problemwe simply do not understand how sensitive temperatures are to
particular levels of CO2
Our point here is not to suggest that the various climate modelers are demonstrably wrong. On the contrary, their simulations are
consistent with the historical data, and in fact have been calibrated such that a strong graphical case can be made that anthropogenic
influences are necessary to explain the observed warming of the 20th century (IPCC 2007, p. 684). Rather than claiming falsification,
instead we are merely pointing out that the simulated response of global temperatures to GHG emissions have not yet played out
according to IPCC estimates. The reported best guess of 3C warming from a doubling of CO2 concentrations relies on feedback effects
that, according the IPCC models, have not yet fully manifested themselves and/or were offset by other factors through the year 2005. It
is still entirely plausible, therefore, that future climatologists will substantially revise their estimate of climate sensitivity, because
presumed feedbacks and offsetting factors are not currently being modeled correctly. The point we wish to drive home to economists is
that the IPCC estimate of climate sensitivity is not akin to measuring the price elasticity of demand for potatoes. Rather, it is more
analogous to predicting the impact on long run real GDP from a sudden doubling of the money supply. This type of task would yield a
range of estimates from economists depending on the modeling approach, and the results would be much more susceptible to future
revision, compared to a task requiring merely a straightforward measurement.
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Carbon Tax Undesirable: WarmingCannot Cut Emissions Enough

1. A carbon tax will do nothing to address climate change
Iain Murray, Vice-President, Strategy, Competitive Enterprise Institute, A Carbon Copy of a Bad Idea, AMERICAN SPECTATOR,
111912, http://spectator.org/articles/34400/carbon-copy-bad-idea, accessed 1-2-16.
The first argument advanced in favor of a carbon tax is that it would help reduce emissions that allegedly cause global warming. This is
why NASA atmospheric scientist James Hansen occasionally moonlights as an economist to push a carbon tax. Yet a carbon tax that is
set high enough to significantly affect emissions would be devastating to American household budgets. A lower carbon tax will have no
noticeable effect on emissions. As Chip Knappenberger of New Hope Environmental Services recently demonstrated, even a complete
elimination of U.S. carbon emissions today would not detectably affect global temperatures or sea level in 2050 or 2100. Only a globally
harmonized carbon tax could do anything to reduce emissions to the levels which alarmist scientists say are necessary, and the
experience of the failed Kyoto Protocol shows that developing nations will not accept anything that reduces their prospects for economic
growth. Therefore, a U.S. carbon tax will not do anything to stave off or even mitigate whatever threat global warming might present.
2. Even a big carbon tax would have only minimal effect on eventual warming / temperature changes
Exactly what climate benefit would we get for those job and income losses? Cato Institute scientists Patrick Michaels and Chip
Knappenberger have constructed a handy-dandy carbon tax calculator based on MAGICC, a climate model developed with EPA
support. Lets generously assume the carbon tax would reduce U.S. CO2 emissions 80% by 2050, and that climate sensitivity is 3C for a
doubling of CO2 concentrations (even though recent studies indicate lower values). The policy would avert 0.042C of warming in 2050
and 0.106C in 2100. The hypothetical change in temperature in 2050 would likely to be too small to detect or verify. In the National
Oceanographic and Atmospheric Administrations monthly estimates of global average surface temperature, the margin of error is +/0.07C. In other words, the impact of the carbon tax is smaller than NOAAs ability to reliably measure temperature. Such an
undetectably small change in global temperature could have no discernible impact on sea-level rise, tropical storm behavior, polar bear
populations, or any other climate-related phenomenon people care about.
3. We would have to cut emissions by 90% to really solve the problem

CHRISTIAN SCIENCE MONITOR, staff editorial, Al Gores Inconvenient Tax, 7507, p. 8.
The Live Earth pledges do call for personal action against global warming, such as becoming "carbon neutral" and buying only from
businesses committed to solving the climate crisis. Mostly, however, they call for government action, such as a new treaty that would
reduce greenhouse gases by 90 percent in rich countries within a few decades. Any such treaty with that kind of demand for a swift drop
in CO2 output would require the kind of radical change in lifestyles that a stiff carbon tax would bring. Consumption taxes, after all, are
often designed to wean people off bad behavior, such as smoking. A 90 percent drop in these emissions is probably what's needed to
limit any rise in atmospheric warming to 2 degrees Celsius, a goal that many scientists recommend. Most presidential candidates do
endorse pinching pocketbooks, but only indirectly, such as by calling for higher fuel efficiency in vehicles and a cap on greenhouse-gas
pollution from company smokestacks. Such demands on industry have the advantage of creating more certainty in reducing emissions,
but they are complex to enforce. Gore would do both: tax carbon use and cap emissions. Putting a crimp on global warming can't be
done solely by promoting new energy technologies and voluntary conservation. Consumers of oil and coal need a direct tax shock. But
the last time Congress raised the gasoline tax was in 1993. In the Senate, Gore cast the deciding vote. At the next election in 1994, the
GOP won big on Capitol Hill. Politicians took note. It may take more than one Live Earth concert to warm up the public and politicians
to a carbon tax.
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Carbon Tax Undesirable: WarmingLeakage

1. A domestic carbon tax will increase overall emissionscarbon leakage
Just as in a unilateral U.S. cap-and-trade system, a unilateral U.S. carbon tax would likely further increase foreign emissions because of a
phenomenon called carbon leakage. As energy-intensive industry relocates from the United States to other nations such as Mexico,
Vietnam, or China (already the worlds largest emitter of greenhouse gases), GHG emissions and toxic pollutants could increase more
than they would if those industries remained in the United States. Unilateral action by the United States to tax carbon emissions is
unwise because it would not achieve its stated environmental goal: material reduction of global GHG emissions. Carbon taxes will
devastate American manufacturingborder tariffs would not fix the problem because their imposition would induce a trade war While
some may believe that the United States is a post-industrial power, it is still the worlds top manufacturer (although China is gaining),
with manufacturing accounting for 12.2 percent of U.S. GDP. Proponents of cap-and-trade acknowledged that a price on GHG emissions
would negatively affect domestic manufacturing unless the cost was fully and permanently offset. Additionally, to offset the impact on
manufacturing fully and permanently would be to negate the desired environmental impact of the policy (make it more expensive to emit
GHGs and therefore reduce GHGs). To make up for the impact on manufacturers, the WaxmanMarkey cap-and-trade bill gave
temporary free allowances to manufacturers to ease the impact of the cap on emissions. Nearly all manufacturers use energy, and for
those that emit greenhouse gases in significant quantities, such as steelmakers, a tax on a major input would be devastating. Moreover, a
tax on carbon would also affect those who use carbon-intensive fuels for feedstocks, as is the case in the chemical and fertilizer industry.
The recent natural gas boom is encouraging more investment in these industries, but a carbon tax would make such investments much
less appealing. During the cap-and-trade debate in 2009, the National Association of Manufacturers and the National Black Chamber of
Commerce commissioned studies looking at the effect of carbon caps on manufacturing and found that hundreds of thousands of
manufacturing jobs would be lost. A Heritage Foundation study reached the same conclusion. A carbon tax would raise prices on energy
inputs for manufacturing and therefore destroy manufacturing jobs. A carbon tax would especially hurt states with higher concentrations
of manufacturing and that use coal for electricity generation. The Heritage Foundation developed the Manufacturing Vulnerability Index,
a list of states with their combined manufacturing prevalence and coal electricity generation, highly concentrated in the Midwest. These
states have substantial infrastructure for manufacturing and coal-powered electricity generation that would be hit especially hard. A
transition to other power-generation sources and economic activities would be very costly to these already hurting states. While
proponents of a carbon tax explain that they could impose an adjustment tax on goods from countries without a carbon tax to help level
the playing field, such an action could precipitate a trade war. Moreover, it would place U.S. manufacturers that export from the United
States to other markets at a disadvantage when compared to manufacturers that produce in nations without GHG controls. A new carbon
tax should not be imposed because it would harm U.S. manufacturing, destroying the livelihood of too many Americans who want to go
to work producing products for the world.
2. Carbon leakage is a real problemdictates a global response

The Problem of Leakage and the Need for a Global Response. Increasing atmospheric carbon emissions has been known by some to
potentially cause climate change issues since "at least the 1970s." Prior to that some believed that increasing temperatures from
excessive carbon emissions could produce positive results such as improved agricultural yield. The solution to the problem of rapidly
increasing carbon emissions will "in all likelihood require a global response, and will require the engagement of the vast majority of
countries." "Unilateral action by one or a few countries is likely to be ineffective." The issue appears to be well-known in international
discussion regarding possible solutions to the carbon emissions problem and is called leakage. The problem of leakage is the problem
that one country drastically reducing the car-bon emissions within its own borders is likely to cause other countries to increase their own
carbon emissions, and per-haps less efficiently, due to the price drop created by the participating country's efforts. And further, "the
nature of the leakage problem is that the greater the efforts to reduce greenhouse gas emissions, the greater the leakage." That is, the
fossil fuels, such as carbon, that are reduced as a result of a participating country's efforts will mean that the non-participating country
will benefit from those efforts by being able to buy cheaper fossil fuels.
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Carbon Tax Undesirable: WarmingLeakage [contd]

3. Carbon leakage undercuts the effectiveness of any carbon tax
11. Domestic carbon taxes cannot address leakage. High costs of doing business in America will force jobs and economic activity to
leave this country in favor of countries with lower energy prices. China and India have stated they will not impose burdensome climate
regulations on their citizens. Because not all countries will implement carbon taxes, industries will take their jobs to countries where
taxes do not eat their profits. Despite a huge American economic sacrifice, global emissions will remain the same.
4. British Columbia proves the strength of leakage-based objections to a carbon tax

Robert P. Murphy, Senior Economist, British Columbias Carbon Tax and Leakage Into the U.S., Institute for Energy Research, 7
615, http://instituteforenergyresearch.org/analysis/british-columbias-carbon-tax-and-leakage-into-the-u-s/, accessed 1-1-16.
In a future post, I will return to the issue of BCs economy in the wake of its carbon tax. For now, lets focus on its alleged success in
drastically reducing emissions. A highly cited 2013 Sustainable Prosperity study concluded, Since the carbon tax took effect (July 1,
2008), BCs fuel consumption has fallen by 17.4% per capita (and fallen by 18.8% relative to the rest of Canada). A more sophisticated
2012 econometric study, by Nicholas Rivers and Brandon Schaufele, concluded that not only did the BC carbon tax lead to large
cutbacks in BC emissions, but that it did so far more than economists would have expected from mere price effects alone. Heres how
they explained their findings: Our main result is that the BC carbon tax generated demand response that is 4.9 times larger than is
attributable to an equivalent change in the carbon tax-exclusive price. In our preferred model, a five cent increase in the market price of
gasoline yields a 2.2% reduction in the number of litres of gasoline consumed in the short-run, while a five cent increase in the carbon
tax, a level approximately equal to a carbon price of $25 per tonne, generates a 10.6% short-run reduction in gasoline demand. These
results lead us to claim that the carbon tax is more salient than market-determined price changes: carbon taxes produce larger demand
responses than tax-exclusive price increases. [Rivers and Schaufele, pp. 2-3, bold added.] On the face of it, this is rather surprising. After
all, the public has been beaten on the head for years now about the importance of putting a price on carbon, in order for the normal
wonders of supply and demand to do their thing. Yet now, when analyzing the official data after the imposition of the BC carbon tax,
researchers are finding that it is apparently five times more potent than market prices in curbing demand. What gives? The authors
provide an explanation that perhaps BC drivers have a resentment of free-riding, and so people who normally would have scaled back
their emissionsout of concern for global warmingwould not do so before the introduction of the carbon tax. This is because (so our
authors hypothesize) the environmentally conscious BC residents would know that their unilateral efforts would have little
environmental benefit, because other BC drivers would simply increase their emissions. In their words (p. 28), Without a price on
carbon, one outcome of her decision to drive fewer kilometres is that it lowers the cost of driving for the non-environmentally conscious
driver, enabling him to drive more. This is a form of leakage where actual emission reductions from the environmentally conscious
driver are eliminated by increases in emissions from other drivers. However, this resentment is quashed (so our authors speculate) with
the introduction of the BC carbon tax. Now the BC drivers who want to help the environment can scale back their driving with gusto,
knowing that everybody else is on the same playing field. So this is whyaccording to our authorsBC drivers cut back on buying BC
gasoline so much, fully five times more than they would have in the presence of market-driven hikes in the price of gas. Theres one
huge problem with this theory: The free-rider effect applies almost as much to British Columbia as a whole, as it does to any individual
BC driver. That is, if a single province in Canada cuts back its usage of gasoline, this lowers the world price and allows every other
driver on Earth to get slightly cheaper gas. The leakage effect at a provincial level is still enormous. Buying Gas Elsewhere? There is a
much more plausible explanation for the results. The studies touting BCs declining gasoline consumption dont actually directly
measure consumption but rely on the proxy of gasoline sales within British Columbia. Therefore, if millions of drivers in BC are at least
partially responding to the new carbon tax by occasionally driving into neighboring Alberta or Washington State (on their southern
border) to fill up, then the official gas sales in British Columbia would drop while those in neighboring jurisdictions would rise.
Furthermore, notice that this hypothesis explains the alleged salience of carbon taxes versus normal market price hikes: If the price of
gas in British Columbia goes up because of genuine changes in world supply and demand, then prices in Alberta and Washington State
would presumably also rise accordingly; the BC drivers would have no choice but to either pay higher prices or to buy less gas. In
contrast, if the price of gas in British Columbia goes up because of a self-imposed and unilateral BC carbon tax, then there is no reason
for gas in Alberta or Washington State to rise accordingly. This then provides a definite advantage to cross-border gas shopping, giving
another option to BC drivers. They dont simply have to pay higher prices or cutback on consumption. Now, they can plan cross-border
trips to fill up.
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5. A unilateral carbon tax will see substantial leakage
If the United States enacts a substantial carbon tax, it may be acting sooner and more aggressively than other nations. Being a relatively
early mover raises two related concerns: whether emissions reductions in the United States might be offset by leakages that increase
emissions elsewhere in the world and whether a substantial carbon tax would hamper the international competitiveness of American
businesses. Leakage can occur through two channels. First, a US carbon tax will reduce demand for domestic and imported fossil fuels.
That demand reduction will drive down the worldwide prices of oil, coal, and other internationally traded fuels. Those lower world
prices will boost fossil fuel consumption in other countries, offsetting some of the benefit from lower US consumption. The extent of
this offset will depend on the price responsiveness of world supply and demand for fossil fuels. The offset will be larger if the world
demand is highly responsive and supply is less responsive to changes in the world price. Some empirical work has been done on both
demand and supply responses. A recent survey of the literature finds demand elasticities generally fairly low, ranging between 0.6 and
0.8, while supply elasticities are low for oil and gas (less than one), but much higher for coal (ranging up to 20 in some studies). Taken
together, these studies suggest a fairly wide potential range for carbon leakage. Most estimates based on computable general equilibrium
models fall in the 10 to 30 percent range, but some other models find much higher leakage rates.
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Carbon Tax Undesirable: WarmingNo Warming Problem

1. Warming claims are speciouswe are not even sure how sensitive the climate is to CO2 levels
Although global-warming activists consistently claim that the science on global warming is settled, anyone who has any familiarity with
the scientific process would understand that research is a constant, ongoing process. For instance, one critical component of unsettled
science is how much warming will be generated by a given increase in atmospheric CO2 levels. This important (possibly all-important)
relationship is called the ECS. The ECS typically gives an expected warming in degrees centigrade for a doubling of atmospheric CO2
levels. Instead of using a single number, or point estimate, for the ECS, the IAMs use a distribution of possible values for the ECS. In
essence, the distribution is a spectrum of values in which potential temperatures are weighted by their probability of occurrence. Because
of the myriad factors that affect measured temperatures, estimates of ECS distributions are themselves uncertain and evolve as new data
and theory are added to the process. The IAMs used by the IWG to estimate the SCC are grounded on the specification of such an ECS
distribution. Since 2010, the IWG has used an ECS distribution based on an academic paper by Gerard Roe and Marcia Baker published
seven years ago. Since then, a number of updated ECS distributions have been estimated, suggesting lower probabilities of extreme
global warming. For instance, substituting the ECS of Otto et al. for the outdated Roe and Baker distribution, used in the 2013 TSD,
causes the SCC for 2020 to drop 41 percent with the DICE model and over 60 percent with the FUND model. There were similar
reductions on the SCC for other years as well.
2. Accumulating evidence shows that warming is not a justification for a carbon tax
Patrick Michaels, Senior Fellow, Cato Institute, The Carbon Tax: Washingtons Latest Bad Idea, Oddly Shepherded by Republicans,
FORBES, 7513, www.forbes.com/sites/patrickmichaels/2013/07/05/the-carbon-tax-washingtons-latest-bad-idea-oddly-shepherdedby-republicans/, accessed 1-5-16.
Inglis theoryyou cant make this kind of stuff upis that his tax is going to be magically adopted by Congress in some type of grand
deal during President Obamas last year. Ask yourself: when was the last time the opposition party made big deals with a lame duck
Administration? Every polemic I have seen on the carbon taxincluding Inglisparticularly and specifically ignores recent global
warming science in complete contravention of a mountain of evidence now accruing that global warming was dramatically overforecast
by scientists who had every incentive to do just that. Furthermore, with regard to revenue neutrality, the notion that gazillions of
dollars will float through Washington unmolested (h/t to Heritages David Kreutzer for that zinger) is as foolhardy as ignoring what is
happening in climate science. Ignoring the science means disregarding 14 separate experiments published in the scientific literature in
the last two years, all showing that way too much global warming was forecast. The fact that there isnt any temperature trend
whatsoever in the last 16 years is forcing scientists to confront the reality that the carbon taxers are choosing to evade. The failure of the
forecasts of dramatic warming is systematic. A presentation in late June at the American Geophysical Unions Washington meeting on
climate science and policy, titled Policy Implications of Climate Models on the Verge of Failure, demonstrated that, using the
normative rules of science, the forecasts presuming big warming must now be abandoned. One can use the EPAs own model (curiously,
acronymed MAGICC) to assess the effects on global temperature of emissions reductions that would be caused by a carbon tax.
Assuming outrageously high taxes that would reduce them by 83% (giving Americans the per-capita emissions of 1867), the amount of
warming that would be prevented is too small to measure on the 50-year time scale. Anything less does even less.
3. High prices will decrease emissions anyway

Jim Johnston, policy advisor, Heartland Institute, Emissions Trading, Carbon taxes or Fuhgetaboutit, HEARTLAND
PERSPECTIVES, 1708, http://www.heartland.org/Article.cfm?artId=22584, accessed 1-1-16.
There might be a solution already in place. Energy prices have grown rapidly in the last three years and are now, in nominal terms, near
an all time high. Corresponding to the high prices, conservation efforts have kicked in and with them a reduction in carbon emissions.
They declined 1.5% in 2006 and probably more so in 2007. Why force even more high-cost reductions with emissions trading or a
carbon tax? That would be piling on an already difficult situation and probably retard economic growth worldwide without substantially
reducing emissions. Moreover, there would be virtually no incremental moderation in global warming. We should take Tony Soprano's
advice about emissions trading and the carbon tax. Fuhgetaboutit.
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Carbon Tax Undesirable: WarmingNo Warming Problem [contd]

4. Even the IPCCs own data does not justify acting to cut emissions
Ironically, this is not the case. According to 2013 IPCC report [often referred to as AR5 for Fifth Assessment Report], to likely
limit global warming to 2C would require stabilizing atmospheric concentrations between 430 480ppm by the year 2100. The same
AR5 report shows that achieving this climate goal would entail reductions in consumption in the year 2100 of 4.8 percent (which is the
central estimate, and relative to the baseline). These are the costs of achieving the popular 2C goal, according to the latest U.N. report.
In contrast, to compute the benefits of the 2C goal we would need to know the reduction in climate change damages that would result
under businessasusual versus the mitigation scenario (with the temperature ceiling). Even under the most pessimistic emission scenario
with no government controls (RCP8.5), by 2100 the AR5s central estimate of global warming is about 4.5C, and a more realistic
businessasusual scenario (between RPC6 and RPC8.5) would involve warming by 2100 of less than 4C.1Therefore the gross benefits
of the stipulated mitigation policy are the climate change damages from 4C warming minus the climate change damages from 2C
warming. Unfortunately, the AR5 report does not allow us to compute such figures, because just about all of the comprehensive analyses
of the impacts of global warming consider ranges of 2.5C 3C. The AR5 does contain a table summarizing some of the estimates in
the literature, out of which the most promising (for our task) are two results from Roson and van der Mensbrugghes 2012 study. They
estimated that 2.3C warming would reduce GDP by 1.8 percent, while 4.9C warming would reduce GDP by 4.6 percent. (Note that
this particular estimate was the only one in the AR5 table that estimated the impact of warming higher than 3.2C.) Therefore, using
ballpark figures, one could conclude from the AR5 summary of impacts that limiting climate change to 2C rather than an unrestricted
4C of warming, would mean that the Earth in the year 2100 would be spared about (4.6 1.8) = 2.8 percent of GDP loss in climate
change damages. In contrast, the same IPCC AR5 report told us that the economic compliance costs of the mitigation goal would be 4.8
percent of consumption in the year 2100. As this demonstration has shown, even if we take the IPCCs numbers at face value, and even
assuming away the practical problems that would prevent mitigation policies from reaching the theoretical ideal, the popular climate
goal of limiting global warming to 2C would most likely entail greater economic damages than it would deliver in benefits (in the form
of reduced climate change damages). The pursuit of more aggressive goals, and/or the use of imperfectly designed policy tools to
achieve them, would, of course, only make the mismatch between costs and benefits even worse.
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Carbon Tax Undesirable: WarmingOther Countries

1. A carbon tax will have no global effectemissions from other countries
Even if one assumes that rising levels of carbon dioxide in the atmosphere lead to higher global temperatures, a carbon tax in the United
States that reduces emissions domestically would have zero direct effect on foreign emissions if we acted alone. In fact, unilateral action
by the U.S. would have very little effect on total global emissions. The EPA analyzed a cap-and-trade proposal and projected global CO2
concentrations in a baseline and under legislation, demonstrating the effects graphically. (See Chart 1.) The Administrator of the EPA
testified on July 7, 2009: I believe the central parts of the [EPA] chart are that U.S. action alone will not impact world CO2 levels.
The analysis showed that even if the U.S. adopted stringent carbon caps under that legislation and the international community did not,
global CO2 concentrations would decrease 25 parts per million (with concentrations equaling 694 ppm in 2095). International action, by
contrast, would decrease concentrations by 202 ppm.
2. A domestic carbon tax will not decrease warming

Paul C. Knappenberger, Assistant Director, Center for the Study of Science, Cato Institute, A U.S. Carbon Tax Wouldnt Slow Down
Global Climate Change, U.S. NEWS & WORLD REPORT, 121012, www.cato.org/publications/commentary/us-carbon-taxwouldnt-slow-down-global-climate-change, accessed 1-9-16.
A carbon tax will not achieve the goal of substantially mitigating global climate change. There is one, and only one, reason for
instituting a carbon tax: to attempt to mitigate the impacts of climate change induced by humankinds use of fossil fuels for the
production of energy. And about the only thing that a carbon tax in the United States will not do is mitigate global climate change in any
meaningfulscientifically, or otherwisemanner. Why? Because, based on mainstream estimates, of the approximately 3C of global
warming that is being projected to occur between now and the end of the century as a result of anthropogenic carbon (dioxide)
emissions, the U.S. contribution will only be about 0.2C, or about 7 percent of the total warming. And this is assuming that no carbon
tax is put in place. Carbon dioxide emissions from the rest of the worldprimarily driven by rapid emissions growth in developing
countries like China and Indiawill be responsible for the other 93 percent of temperature rise. The best that any carbon tax in the
United States could ever hope to achieve would be to reduce the amount of global warming across the 21st century from about 3.0C
down to about 2.8C. And that tiny, inconsequential reduction would only occur if all greenhouse gas emissions from the United States
were halted forever, starting tomorrow, which isnt the plan. The emissions reductions under any sort of carbon tax will be realized
slowly, reducing the magnitude of the global temperature rise that the tax would avert. For example, a carbon tax designed to smoothly
reduce our greenhouse gas emissions from their current level to zero by the year 2100 would result in only about 0.1C of global
temperature savingsan amount, on its own, not worth pursuing. Any perceived utility of a carbon tax does not lie in domestic
reductions, but in the hope that it will spur technological innovations for cheap, reliable, nondangerous, environmentally friendly, zeroemissions energy production which would then be freely shared with, and quickly adopted by, the rest of the world. That seems wishful
thinking on the time scales that matter.
3. Carbon taxes cannot address emissions in other countries

If greenhouse gases were a pollutant like sulphur dioxide that largely stays within national borders such a policy might make sense. But
they are not. Its a global pollutant. Thats why we talk about addressing global warming, not American warming. Mankiws preferred
climate solution aims at getting U.S. consumers to buy slightly more fuel efficient cars or turn off light bulbs more regularly because
energy prices are modestly higher. This will have little impact on global emissions because virtually all their growth will be in rapidly
growing developing nations like China and India. Moreover, greenhouse gases are not like traditional pollutants in another sense: they
are cumulative, essentially filling the atmospheric bath tub. We therefore cant afford to simply slow their growth; we need to
dramatically cut emissions.
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Carbon Tax Undesirable: WarmingOther Countries [contd]

4. A domestic carbon tax will only have a tiny effect on global emissions
Carbon Tax Hell has five circles: The first consists of erroneous expectations about the ability of a carbon tax imposed in the United
States to affect global temperatures. The assumption is made, usually tacitly, that of course a carbon tax would reduce future
temperatures, and this would justify the costs and sacrifices involved. The proponents of the tax let people think this, but they do not
attach a specific number to the predicted temperature reduction. In fact, the impact would be tiny. As described below in connection with
climate modeling, the projections of the Intergovernmental Panel on Climate Change (IPCC) about the effects of CO2 on warming are
highly suspect. However, even if the IPCC conclusions are taken as accurate, a drastic 83 percent reduction in CO2 emissions from the
United States over the next four decades would reduce global temperatures by 0.11C, which is 4 percent of the IPCCs midrange
warming estimate of 2.96C over the next century. As discussed in later sections of this paper, the IPCCs models overstate the future
impact of CO2 on temperature, so the actual impact of U.S. action would be infinitesimal rather than just tiny.
5. Reducing U.S. emissions will have virtually no effect on global temperatures

The central justification for a tax on GHGs is that it will meaningfully reduce those emissions and, by extension, their impact on global
temperature. Charles (Chip) Knappenberger of the Cato Institute analyzed the impact of a carbon tax on future increases in temperature
in Climate Impacts of Waxman-Markey (the IPCC-based arithmetic of no gain) and Carbon Tax: Climatically Useless. For his
analysis, Knappenberger accepted IPCC modeling about the effects of CO2 on the environment. He also accepted as a goal the results
sought in the 2009 Waxman-Markey bill, which aimed at an 83 percent reduction in carbon emissions. Knappenbergers conclusion was
that after the monumental effort that Waxman-Markey would require: Instead of 0.19C of warming coming from the U.S. by the year
2100 (assuming the IPCC mid-range scenario), our contribution would have been reduced to 0.08Cfor a net savings of about
0.11C of global warming. . . . This amount is of virtually no environmental consequence . . . . The result is shown in the following
table, which takes as a baseline the IPCC midrange estimate of 2.96C of warming and examines three scenarios for the U.S.: Businessas-usual, with no carbon tax; a $15/ton carbon tax; a $25/ton carbon tax. Knappenbergers work reveals two more important points to
consider when evaluating the carbon tax debate. First, reducing U.S. emissions alone will have little effect on global emissions and
global temperature trends. Despite rhetoric to the contrary, the IPCCs own models reveal the actions being considered would have
virtually no environmental consequence. Second, to obtain results that would have noticeable environmental consequences, a carbon
tax substantially higher than $25 per ton is needed to further drive out fossil energy. Imposing a tax at those levels, however, would
greatly increase the costs of the tax. Furthermore, the assumptions used by Knappenberger may actually overstate the effect on
temperature. For purposes of argument, he accepted the validity of IPCC models, even though he recognized that There is growing
evidence that actual global temperatures are not evolving the way projections indicate that they should. (See also pages 16-21, infra.)
Knappenberger also looked at the projected impact if other nations copied the U.S., in Climate Impacts of Waxman-Markey (Part II)
Global Sign-Up. He concluded, as does any sensible observer, that no significant reduction of CO2 emissions is possible unless China
and India are enlisted in the effort. So, the bottom line is that the main opportunity presented by the carbon tax is for the U.S. to do itself
great harm vis--vis other nations, while doing almost nothing for global temperatures.
6. A domestic carbon tax would only have a modest effect on global emissions
The environmental effects of a carbon tax would probably disappoint the policy's most ardent proponents and underwhelm its most vocal
opponents. First, a U.S.-only carbon tax could have only quite limited environmental effects. The Department of Energy's Carbon
Dioxide Information Analysis Center finds that the United States emits only about 17% of the world's CO2, while China emits more than
a quarter and the EU as a whole about 13%. The United States has already made progress; American CO2 emissions have fallen faster
than those in Europe over the past decade. This doesn't mean that a carbon tax wouldn't help further reduce emissions, but its global
effect would be limited.
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Carbon Tax Undesirable: WarmingAnswers to Insurance Policy

1. Insurance analogies simply do not justify a carbon tax
Another problem with Weitzmans approachas Nordhaus, among other critics, has pointed outis that it could be used to justify
aggressive actions against several catastrophic risks, including asteroids, rogue artificial intelligence developments, and bioweapons.
After all, we cant rule out humanitys destruction from a genetically engineered virus in the year 2100, and whats worse we are not
even sure how to construct the probability distribution on such events. Does that mean we should be willing to forfeit 5 percent of global
consumption to merely reduce the likelihood of this catastrophe? This question leads into the final problem with the insurance analogy:
With actual insurance, the risks are wellknown and quantifiable, and competition among insurers provides rates that are reasonable for
the damages involved. Furthermore, for all practical purposes buying the insurance policy eliminates the (financial) risk. Yet to be
analogous to the type of insurance that Weitzman et al. are advocating, a homeowner would be told that there was a roving gang of
arsonists who might, decades from now, set his home on fire, that a fire policy would cost 5 percent of income every year until then, and
that even if the house were struck by the arsonists, the company would indemnify the owner for only some of the damages. Who would
buy such an insurance policy?
2. Insurance policy claims do not warrant a carbon tax

It is here that the notion of a carbon tax as an "insurance policy" will often arise. The metaphor is terribly inapt. An insurance policy is a
contract under which one pays slightly more than the expected value of an unlikely catastrophe, and the asset pool created by many such
payments is used to compensate those who are ultimately struck. A carbon tax is arguably the opposite: Each dollar spent and every lost
opportunity for economic growth today leaves society with fewer resources to cope with any catastrophe that might occur, without
providing a commensurately valuable reduction in its likelihood. The insurance-policy argument appears to be a more emotional one,
arising from the notion that the United States should do whatever it can, and that any emissions reduction that can be achieved
affordably should be pursued for whatever marginal benefit it might offer. If that is in fact the argument, the detachment from any
conception of Pigovian efficiency is complete. But often, before abandoning altogether a rational assessment of environmental tradeoffs, one more shell appears from out of nowhere: local air pollution.
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Carbon Tax Undesirable: WarmingAnswers to Other Countries Model / Follow

1. A carbon tax will not spill-over globallyit is simply not in the interest of developing countries
Placing domestic emissions to the side, the pro-tax case quickly shifts to the international scene, where U.S. "leadership" in the form of a
unilateral domestic carbon tax is described as necessary for and perhaps even the lynchpin of global action. As a preliminary matter,
conceding in advance and then arriving at the table without any bargaining chips is a very poor negotiating strategy. To the extent such
an agreement could move forward, moreover, it makes little sense to suggest that our weak domestic action would serve as the basis for
a strong global agreement. The larger problem, of course, is that under no theory of negotiation will developing countries accept costly
policies that would slow their economic growth and hinder their populations' climb out of crushing poverty. Rapid electrification is a
critical economic and social priority for these countries, and rightly so. A 2012 study from the World Resources Institute, for instance,
identified 1,200 new coal power plants on drawing boards worldwide with more than three-quarters of that capacity in China and India.
Just last month those two countries issued a joint communiqu demanding more action and financial support from developed nations but
made no emissions-related commitments of their own. Developing countries will pursue pollution reduction and invest in alternative
energy technologies where it is in their interest to do so, and they may even sign on to politically attractive and non-enforceable
agreements. But there is neither evidence nor logical reason to suggest that the United States can alter other countries' rational
negotiating positions by displaying "leadership." If one truly believed a domestic carbon tax could serve as an instrument for fostering a
global deal, its implementation should be suspended pending execution of a deal that met the desired parameters. Establishing those
parameters would no doubt be difficult, but laying them out would be a valuable exercise in itself. No such proposals are forthcoming.
2. A unilateral carbon tax wont make a dent in emissions, and other countries wont model
Nicholas Loris, Fellow, Heritage Foundation, Carbon Tax: Still a Bad Idea, DAILY SIGNAL, 32113,
http://dailysignal.com/2013/03/21/carbon-tax-still-a-bad-idea/, accessed 1-4-16.
Proponents of a carbon tax may argue thats a small price to pay to save the planet, but the reality is that its an exorbitant price to pay to
not have any impact on climate change whatsoever. Unilaterally reducing greenhouse gases would not make a dent on global emissions
and only moderate temperatures a few tenths of a degree Celsius over the next 85 years. It is nothing more than wishful thinking to
assume that if the U.S. enacts a carbon tax, the rest of the world would as well. Developing countries want access to cheap, reliable
electricity; are building new coal-fired power plants faster than we can count; and have more pressing environmental needs like gaining
access to clean drinking water and breathable air. Even if international consensus on enacting a carbon tax existed, the massive
worldwide energy tax would be unwise. Congress should categorically reject all ideas of a carbon tax and work to undo the backdoor
carbon regulations imposed by the Environmental Protection Agency that are having similar crushing economic and miniscule
environmental impacts.
3. Even a global carbon tax would do little to decrease fossil fuel use
The entire exercise is supposed to be in service of reducing carbon-dioxide emissions and averting climate catastrophe. But the carbontax proposals under discussion cannot achieve their emissions-reduction targets, let alone make a noticeable dent in global emissions.
Even a global taxa political non-starterwould fail to push oil and gas prices any higher than they already were several years ago, a
time at which environmentalists were hardly sanguine about the future. But once businesses and consumers are paying the right price
for their emissions, where will the case be for other action? There are political points to score with a carbon tax, and profits to capture,
too. But these wont benefit society; they will come at its expense.
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Carbon Tax Undesirable: Answers to Air Pollution

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Alleged air pollution benefits do not justify a carbon tax

Clean air is the last refuge of the carbon-tax advocate. Like patriotism, it can be a noble cause, but both are subject to misuse and abuse
when all other arguments have failed. The misuse here comes with the claim that a co-benefit of reductions in CO2 emissions,
particularly thanks to the shuttering of coal plants, will be a reduction in emissions of pollutants like particulate matter and ozone
precursors that cause substantial and immediate detriment to human health. Even if the costs of climate change cannot be properly
valued, or even if a carbon tax will not do anything to avoid those costs, these health costs can be valued and thus the tax can be justified
as an efficient way to tackle them. But particulate matter and ozone are not CO2, nor are their emissions necessarily correlated. Naturalgas plants, for instance, eliminate some types of pollution almost entirely but still emit half the CO2 of coal. A carbon tax heavily
preferences expensive solar, wind, and nuclear energy over cheap natural gas, which would not be the top priority of someone most
concerned for public health. Moreover, because the pollutants that harm human health have primarily local effects (unlike CO2), one
part of the country might be suffering no harm from their minor presence while other parts struggle with excessive concentrations. The
United States already has a robust regulatory regime, the Clean Air Act, tailored to managing these pollutants and this challenge. The
Act sets air-quality standards for each pollutant at the level deemed safe for human health, and imposes stringent restrictions in areas of
the country where pollution exceeds those levels. Most Americans live in areas of the country where no pollutant exceeds the publichealth standard. Yet the carbon tax would suppress all economic activity where they live to the same degree it might in areas with poor
local air quality. Using a nationwide tax to compensate for externalities the costs of which are concentrated where less than half the
population lives is plainly inefficient, and certainly not Pigovian. Applying that tax to the wrong type of emissions only adds insult to
injury.
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Carbon Tax Undesirable: Answers to Budget / Revenues

1. Carbon taxes are a terrible way to raise revenuemultiple reasons
A good tax base is fairly constant, ideally growing in proportion to government spending. Those attached to GDP, despite the problems
of cyclicality, are usually best. Tax bases like income and consumption thus make sense, though they have the drawback of creating
deadweight loss by taxing a societal good. Pigovian taxes adopt less stable tax bases but have the benefit of eliminating deadweight loss
rather than creating it. To actually fund government through a Pigovian tax, though, one needs to tax activities that will not only
continue but grow over time despite the tax. Carbon, by contrast, is a declining-by-design tax base. Regardless of climate policies,
carbon consumption has declined and will continue to decline relative to GDP as the economy's energy efficiency improves. Implicit in
the design of a carbon tax is the assumption that its use will decline in absolute terms as well. And most tax designs increase the tax rate
over time with the intention of accelerating that decline. In the short to medium run, it is possible if not probable that an increasing tax
rate would overwhelm declining emissions and lead to increasing rather than decreasing revenues. Indeed, in a range of proposals
studied by Roberton Williams and Casey Wichman, revenue forecasts at least doubled from 2015 to 2050, typically ending in a range
between $200 and $400 billion per year. But counting on continued rate increases to offset a declining tax base is a Ponzi scheme. The
further emissions fall, the higher rates must go. And because the revenue is equal to the base multiplied by the rate, as the base declines
toward zero the rate must increase toward infinity to hold revenue constant. If the United States does not find itself on a trajectory
toward eliminating CO2 emissions, then the issue is moot (much like the case for a carbon tax). But if U.S. emissions do decline
continuously, the Ponzi scheme will inevitably collapse, and one can only hope it happens quickly. The longer the scheme continues, the
tighter the death spiral of higher tax rates driving less efficient technologies into the market to eliminate ever-costlier marginal units of
emissions, necessitating yet higher tax rates. Regardless of the time horizon of the tax-base collapse, programming a collapse into the tax
code is a substantive and political error of enormous proportion. Substantively, it is simply bad fiscal policy to rely on something so
unpredictable and ultimately unstable for revenue. One could of course sequester the revenue put it directly toward deficit reduction,
say, or the Social Security trust fund but then one must grapple with the macroeconomic effects of simply imposing a major tax
increase. Politically, a major source of tax revenue programmed to eventually vanish is a ticking time bomb. Any proposal for entering
into a carbon-tax regime must also address how to exit it; so far, none do. A carbon tax is also fundamentally at odds with the objective
of "simplification," a goal that most reformers recognize as a critical priority for tax-code updates and a valuable end in itself. No
carbon-tax proposal eliminates any other tax entirely, so the net result is the introduction of yet another new tax base, set of rates and
interaction effects, and administration. Its basic functioning even assuming no exceptions, waivers, and other political handouts
would likely require offset payments for not only carbon capture and sequestration but also the negative emissions that IPCC models
often assume. As an added bonus, proposals that incorporate a household rebate to offset regressivity implicitly create a basic income for
all Americans and would require the construction of a federal infrastructure to deliver it. Carbon-tax proponents will often allude to a
system of "border adjustments" to offset the trade distortions created by the tax, avoid damage to energy-intensive exporters, and avoid
emissions leakage to other countries. But such adjustments are extraordinarily complex for imports (how does one value non-tax carbon
policies in other countries?), are likely prohibited by trade agreements with respect to exports, and would offer an enormously lucrative
opportunity for inefficient, rent-seeking distortions. In short, if one has a spending priority so worthy as to deserve the raising of new
revenue, a carbon tax may be the single worst proposal for doing so under serious discussion today.
2. Potential new programs / revenues are not valid justifications for a carbon tax
And yet, talk of how the revenue from a carbon tax might be spent has somehow become one of the most prominent arguments in favor
of this particular approach to taxation. This should go without saying, but identification of an attractive tax cut or spending program is
not an argument for a carbon tax. When one claims that pairing a carbon tax with a corporate-tax reduction produces economic growth,
one has demonstrated nothing about a carbon tax; only that a corporate-tax reduction is good for the economy. One could just as well
propose a tax on people whose last names start with the letter B, put the revenue to the same use, and declare victory. The most attractive
proposal will pair the best use of revenue to the best source, but as we have already seen, a carbon tax is not that source. Rather than
resting on any economic basis, the fiscal argument for the carbon tax devolves into the purely political: Proponents have identified what
they believe are attractive uses of revenue and see a carbon tax as the most politically plausible source of that revenue. But here again
the shells are flying fast, because those uses of the carbon tax that might produce economic growth (likely a reduction in taxes on
capital) are not politically plausible at all.
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Carbon Tax Undesirable: Answers to Cap-and-Trade Is Worse

1. Carbon taxes are still a bad idea even if they are marginally better than cap-and-trade schemes
Energy makes modern society possible. It lights the night, heats our homes, powers our entertainment, and most importantly, it helps us
conserve the ultimate non-renewable resourcetime. Energy amplifies our ability to do work. Machines help autoworkers assemble
cars, power tools help construction workers build our homes, gasoline-powered automobiles help us take care of our families, dieselpower trucks distribute fresh produce across the country, and electricity-powered computers give us unprecedented access to
information. But the energy that supplies 85 percent of our needscoal, oil, and natural gasare under attack. Politicians and special
interest groups are proposing various methods to tax these abundant and reliable sources of energy. The newest attack on oil, natural gas,
and coal are proposals to tax carbon dioxide emissions. Noted economist Art Laffer and current U.S. Rep. Bob Inglis (R-S.C.) argued in
favor of a carbon tax in a New York Times op-ed. Author, commentator, and syndicated columnist Charles Krauthammer made his case
for a large increase in the gas tax in the Weekly Standard . And Fred Smith, the CEO of FedEx, has publicly declared his support for a
tax on carbon dioxide emissions. The arguments boil down to the assertion that carbon taxes are favorable because they are better than
cap and trade schemes. This is correct, but it does not mean that we should implement carbon taxes. Carbon tax implementation would
run into many of the same problems that have plagued cap and trade. Politicians cannot resist new opportunities to raise tax revenues and
dole out our dollars to favored constituencies, especially when the revenues range from hundreds of billions to trillions of dollars.
Carbon taxes might hold some allure, but ultimately they are economically destructive. Neither carbon tax nor cap and trade is good for
American consumers.
2. It is insufficient to show that a carbon tax is better than cap-and-tradethe policy is still a net-bad idea
Nearly all of the above arguments against a carbon tax apply equally to cap and trade schemes. The only real difference is that cap and
trade is a stealth tax that brings a large amount of reporting, implementation, and regulatory problems. The point of cap and trade plans,
like carbon taxes, is to increase the price of energy from oil, coal, and natural gas. Lawmakers may say they have plans to rebate some
people so that everyone does not suffer, but it is not possible to craft a cap and trade plan that is perfectly offset by rebates. Just because
a politician promotes a plan that is budget neutral for government does not mean it is budget neutral for American families. When
politicians redistribute money, there will be winners and losers. The winners will be the politically well-connected groups and the
populace as a whole will lose. Like carbon taxes, it is not possible to set a cap for cap and trade plans at an optimal level. The smartest
people in the world could not aggregate enough data quickly enough to discover the optimal level of the cap or a cap and trade scheme
or the level of a carbon tax. It would require too much data about Americans preferences and about uncertain climate science. To
complicate matters, if the cap set at the wrong level, or if the plan does not include all nations, the inefficiencies will swamp any possible
benefits. Most disturbingly, if the United States unilaterally reduces our carbon dioxide emissions, it will not have a real effect on global
carbon dioxide concentrations. This means there will be no environmental benefits to the United States unilaterally reducing carbon
dioxide emissions. Cap and trade schemes are very regressive taxes. They will transfer wealth from poorer areas of the country to
wealthier areas. Cap and trade will also reduce energy use and thereby reduce economic output. Also, if we drive up costs, cap and trade
plans will reduce American economic competitiveness and cause more jobs to flee to foreign countries. In short, cap and trade and
carbon taxes are two different ways to raise energy prices. Both carbon taxes and cap and trade would harm the United States economy
without making any meaningful differences in global concentrations of carbon dioxide.
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Carbon Tax Undesirable: Answers to Conservative Justifications / Grand Bargain

1. Carbon taxes are a bad ideathere is not a conservative case to be made for them
This study has shown just how dubious this popular narrative is. Indeed, many proponents of a carbon tax are denying a growing body
of lowsensitivity findings, as well as a large and growing discrepancy between climate model predictions and temperature observations
in the lower atmosphere. Furthermore, relying on standard results in the economics of climate change literature, we have shown that
there are serious problems in the estimation of the social cost of carbon, and that even if we knew it, other considerations would imply
that an optimal carbon tax should be significantly lower than the estimated social cost of carbon. Of particular relevance to
libertarians and conservatives, we further showed that the tax interaction effect suggests that there most likely would not be a double
dividend boost to conventional economic growth, even if a carbon tax were fully refunded through payroll tax cuts or lumpsum
payments. In the more realistic scenario in which a carbon tax would only partially be refunded, the results arent even close: such a tax
would clearly hurt the conventional economy, meaning that it could only be justified on environmental grounds. Finally, we critically
analyzed the realworld carbon tax experiences in Australia and British Columbia. We found that the promises of a marketfriendly
U.S. carbon tax were violated in both cases. Even in the case of British Columbiahailed by carbon tax advocates as the best example
to dateafter an initial drop, the tax has not yielded significant reductions in gasoline purchases, while it has apparently reduced the
B.C. economys performance relative to Canada. Libertarians and conservatives in particular should not simply trust the assurances from
the advocates of a carbon tax, but should instead read the relevant literature themselves. In both theory and practice, a U.S. carbon tax
remains a very dubious policy proposal.
2. There will be no grand bargainwe cannot expect meaningful tax offsets

There are many reasons economic and otherwise why a tax on carbon dioxide is a bad idea. Lets examine just two of the economic
reasons. First, Conca concedes that higher taxes are economically harmful. His solution is to reduce taxes in other sectors of the
economy. The problem is the same liberal activist groups who want to implement carbon dioxide taxes oppose corresponding tax cuts.
The Center for American Progress, for example, says carbon dioxide tax revenue should be given to the renewable energy industry rather
than returned to the American people. Curiously, the Center for American Progress fails to disclose that it is funded by the renewable
energy industry and its founder and chairman of the board has a long and successful career as a renewable energy lobbyist. Conca must
first convince his liberal activist group allies to not pilfer carbon dioxide tax revenues before he can plausibly argue that carbon dioxide
tax revenues would be returned to the American people. (Good luck on that, by the way, because the Center for American Progress
argues very strongly that the renewable energy industry must get to keep the tax spoils rather than government returning the tax money
to the American people.)
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Carbon Tax Undesirable: Answers to Energy Security

1. New energy production technology is driving down fossil fuel prices
It was inevitable. As soon as consumers and the economy start to enjoy significant relief from a decade of pain at the pump, the political
class clamors for higher gas taxes and new carbon taxes. The recent reduction in energy costs is remarkable. The U.S. Energy
Information Administration (EIA) reports a 43% decline in the energy component of the Goldman Sachs Commodity Index during 2014.
According to EIA, the drop in fuel prices was not due to strong underlying trends in global economic growth but rather to supply-side
factors unique to energy-related commodities. Fuel prices are down because the revolution in unconventional hydrocarbon production
increased crude oil and natural gas supplies, and Saudi Arabia has failed to persuade other OPEC members and Russia to behave like a
cartel and cut output. Crude oil spot prices recently dipped below $54 per barrel. As a result, regular gasoline is now selling for about
$2.20 a gallon roughly one-third less than in Jan. 2014.
2. Carbon taxes magnify the negative effects of energy price volatility for consumers
Summers is aware of the criticism that carbon taxes impose disproportionate burdens on low-income households and workers with long
commutes. But, he contends, Now that these consumers have received a windfall from the fall in energy prices, it would be possible to
impose substantial carbon taxes without them being burdened relative to where things stood six months ago. Translation: Taxing carbon
will leave consumers better off than they were six months ago, even if worse off than they are now whats not to like! Plenty,
actually. For consumers, a carbon tax would increase the risks of energy-price volatility while reducing (confiscating) the benefits. When
gas prices passed $3 and even $4 a gallon, there was no mechanism in the law adjusting gas taxes downward to alleviate the windfall
losses consumers incurred at the pump. What happens if crude oil and gas prices shoot back up? Since Summers does not say otherwise,
we may infer that consumers would be stuck with the carbon tax adopted when gas prices were low. More precisely, consumers will be
stuck with a carbon tax that grows over time, whether oil prices rise or fall. As Summers puts it, $25 a ton is just a reasonable start.
Heads Big Government wins; tails, consumers lose.
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Carbon Tax Undesirable: Answers to Fossil Fuels Privileged Now

1. Energy consumption is already constrained by taxes and government control of sub-surface minerals
Thats more than Summers or anyone else can know. Evidence abounds that tax and regulatory burdens have grown beyond
economically-optimal levels. By slowing income growth and increasing the cost of final goods and services, high taxes and regulatory
excess limit consumption, including consumption of energy-related products and services. Energy consumption is more directly
constrained by specific infringements of economic liberty. For example, in most countries, subsurface mineral rights are owned by the
state. That restricts market entry, which limits supply, which in turn increases prices and curbs consumption. As my colleague William
Yeatman recently observed, because private parties in such countries dont have skin in the game, theyve every incentive to oppose
drilling below their lands, as theyd bear the burden of drilling (i.e., proximity to an industrial practice) without any of the direct
benefits. State ownership of subsurface mineral rights also reduces the transaction costs required to cartelize energy producers, restrict
output, and increase prices. Government monopoly control of subsurface minerals is the sine qua non of OPEC. Oil prices would be
lower, and people would consume more, in a free market. Although the right of private persons to own subsurface minerals is a bedrock
of U.S. energy policy (pun intended), federal energy law infringes another basic liberty: the right to compete for customers. For 40 years,
Congress has banned exports of crude oil. This policy, too, limits supply, raises prices, and discourages consumption.
2. Fossil fuel companies already pay a ton in taxes

Summers begins by declaring that although there is room for debate about the size of the [carbon] tax and about how the proceeds
should be deployed, . . .there should be no doubt that, given the current zero tax rate on carbon, increased taxation would be desirable.
A strange argument. If there is currently a zero tax rate on something, then increased taxation is undoubtedly desirable. How far is
Summers willing to push that? Somehow I doubt he would support Chinas one-child tax policy, or taxes on educational achievement,
even though emissions derive from consumption, and consumption tends to increase with population and human capital formation.
Although there is no federal carbon tax rate, companies that mine, process, and utilize carbon-based energy pay lots of taxes.
ExxonMobil, for example, paid $31 billion in corporate income taxes in 2012 and more than $1 trillion in total taxes during 1999-2011,
paying $3 in taxes for every $1 in profits. Oil, gas, and coal companies also incur substantial implicit taxes in the form of regulatory
compliance expenditures, as do companies that combust fossil fuels to generate power or manufacture products. For example, EPA
estimates that its Mercury Air Toxics Standards (MATS) rule will cost electric utilities $9.6 billion in 2016 (77 FR 9306), and that its
proposed revised national ambient air quality standards (NAAQS) for ozone will cost $3 billion to $39 billion in 2025 (RIA 7-33).
Dozens of other major air rules for energy-intensive facilities could be cited (see Appendix A of this report).
3. We already pay a functional carbon tax in the form of the gas tax
In addition, as of Jan. 2012, 30 states and the District of Columbia had mandatory renewable electric generation policies. Such measures,
which make electricity more costly and less reliable, are a roundabout way of putting a cap on CO2 emissions and function as a covert
CO2 reduction tax. Federal and state policies impose numerous energy-efficiency standards, which also aim to limit CO2 emissions. A
significant portion of all federal and state tax and regulatory costs affecting carbon energy are passed on to consumers, who also pay
federal and state motor fuel taxes at the pump. At 49.28 per gallon, the current average combined federal and state gasoline tax is
equivalent to a carbon tax of nearly $50 per ton. The idea that carbon is a tax-free zone just because there is no explicit carbon tax rate
is ludicrous.
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Carbon Tax Undesirable: Answers to Nordhaus Evidence

1. Nordhaus case for a carbon tax is weak because he overstates the negative effects of warming
We come to the last major step in Nordhaus argument, going from a given temperature increase to quantitative damages (measured in
money). This crucial step is necessary to set the appropriate carbon tax, but it too rests on a surprisingly fragile foundation. Nordhaus
basic approach is to estimate the damages in major sectors (such as agriculture, coastal regions, etc.) in order to come up with a
percentage of GDP lost to global warming for stipulated increases in temperature. There is a broad range of such estimates, and
Nordhaus sensibly relies on a mixture of their findings, rather than selecting one particular estimate. The problem here is that the more
pessimistic estimates commit serious methodological errors that bias their results, and they consequently likely overstate the damage
from a given amount of warming.
2. Our criticisms of Nordhaus apply to other carbon tax proposals

A professor at Yale University since 1967, William Nordhaus has been chosen as the representative of the mainstream in climate change
economics for his longstanding career in an area in which he literally wrote the book (e.g. originally Nordhaus 1979 and more
definitively Nordhaus 1994b). Although the criticisms of the present paper will be directed at Nordhaus, they will be relevant to most
other proposals for a carbon tax as well. As one expert put it: A lot of economists interested in climate change startand endwith
Nordhaus.
3. Too much calculation uncertainty to trust Nordhaus estimates

Nordhaus method for calculating the optimal carbon tax (as a function of time) is straightforward. He assumes that economic activity
releases greenhouse gases (GHGs), thereby raising the concentration of GHGs in the atmosphere. The increased concentration leads to
higher temperatures, which in turn cause net economic damages to future generations. Because the present generation is assumed to care
about the welfare of its descendants, the emission of the marginal ton of carbon into the atmosphere today translates into a (discounted)
loss in present utility. Market prices do not fully reflect this aspect of the situation, and so (Nordhaus concludes) a Pigovian tax on
carbon usage is justified. For economic efficiency, the tax should just compensate for the present discounted value of the reduction in
future utility flows due to the higher warming caused by the marginal emission. The calibrated ideal tax (which varies over time) is
naturally quite dependent on the numerical estimates undergirding the DICE model. Yet as we shall see, every step in the argument
above relies on estimates with much uncertainty. Therefore, even accepting the basic premise of the argument for a carbon tax,
mainstream economists should be quite hesitant to clamor for its implementation. In the remainder of this section, we summarize these
key areas.
4. Careful analysis shows that Nordhaus is just wrong

The present paper argues that this consensus is unjustified, because the case for a carbon tax is much weaker than most economists are
probably aware. We will illustrate the problems with a thorough analysis of the assumptions underlying William Nordhaus DICE
model, which is an excellent representative of the orthodox approach. We will first document that each critical step in Nordhaus case
relies on numerical estimates that are quite uncertain, and to which the magnitude of the optimal carbon tax may be very sensitive.
After this immanent critique, we will examine some of the drawbacks of real-world government action to assess the danger of Nordhaus
approach.
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Carbon Tax Undesirable: Answers to Nordhaus Evidence [contd]

5. Nordhaus overestimates the benefits of a carbon tax
Unfortunately, we would argue that Nordhaus is still overrating the virtues of his proposed carbon tax. It would be an exercise in
unwarranted precision to assign probability distributions to the strategies in Table 4or better yet, to the strategies in Table 4 after their
costs have been multiplied by some factor to account for non-participationand then to calculate the expected value of an uncertain
climate change policy. Even so, the extreme waste of proposals such as Gores, in contrast to the more modest net benefits of the
theoretically ideal plan, underscore the danger. For an analogy, neoclassical models can certainly demonstrate conditions under which an
optimal tariff enhances welfare. Yet if we were in an initial state of relatively free world trade, how many economists would lend
support to massive new tariffs? What is the likelihood that politicians the world over would enact them according to the
recommendations of theoretical economists, rather than for purposes of revenue or favors to domestic industries? In this context, then,
we ask economists to look before they leap into supporting a massive new global carbon tax (or other such scheme). There is a very real
possibility that it would lead to the worst of both worlds, with worldwide production heavily distorted due to uneven levels and
enforcement of emissions controls, yet with total emissions still in line to cause severe climate change damages according to the
scientific computer simulations.
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Carbon Tax Undesirable: Answers to Price Increases Spur Innovation

1. Carbon taxes failthey do little to spur innovation
Carbon taxes are in vogue. Economists predilection for price signals as the universal solution has fused with environmentalists impulse
to punish Big Oil and Big Coal to make carbon taxes the darling of the climate change debate. Its the elegant solution climate hawks
have been looking for since the death of cap-and-trade. But as Dr. Rob Gross, the Director of the U.K. Imperial College Centre for
Energy Policy and Technology stated, this idea is, so simplistic it is absurd. Carbon taxes are doomed to fail because they do little to
drive what is needed most: innovation that generates affordable clean energy that all 7 billion humans will want to adopt, not out of
altruism or coercion, but out of self-interest.
2. Increasing energy prices does not spur innovation

Economists have built a cottage industry out of comparing carbon taxes, cap-and-trade, and conventional pollution regulations. But an
innovation strategy to develop cheaper, better clean energy technologies doesnt make the cut. Frankly, this shouldnt be a surprise as
innovation is not part of neoclassical economists lexicon. In Mankiws seminal textbook Principles of Economics, the word
innovation is barely mentioned in almost 900 pages of text. But breakthrough technologies like jet aircraft, gas engines, computers and
cell phones have never emerged because their competitors price increased. Steve Jobs didnt develop the PC because the price of a
typewriter went up. We have to only look to Europe for a natural experiment. Their gasoline prices are more than twice as high as in the
United States and serve as a de facto carbon tax. While Europeans buy smaller cars and take more mass transit, they dont buy more
electric vehicles because they are expensive and provide limited range. While a higher gas price can spur carmakers to make smaller,
more fuel efficient internal combustion engine cars, it has not and will not spur them to develop cheap batteries that let you drive 500
miles without a charge. So where do breakthroughs like cheap clean energy come from if not from marginally higher prices? As
innovation economist Mariana Mazzucato recently opined, A quick look at the pioneering technologies of the past century points to the
state, not the private sector, as the most decisive player in the game. In other words, smart government innovation policy that works
with industry is how the world will get cheap clean energy.
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Carbon Tax Undesirable: Answers to Revenue Neutrality

1. It cannot be revenue neutralit so undercuts poor families that we would have divert resources to new social
programs
Iain Murray, Vice-President, Strategy, Competitive Enterprise Institute, A Carbon Copy of a Bad Idea, AMERICAN SPECTATOR,
111912, http://spectator.org/articles/34400/carbon-copy-bad-idea, accessed 1-2-16.
The second argument advanced in favor of a carbon tax is that it could be revenue neutral, replacing another tax, such as the payroll tax,
and thereby moving us from taxing a "good" activity -- labor -- to taxing a "bad" one -- emissions. Yet studies show that a carbon tax is
highly regressive. This is because the costs of a carbon tax are ultimately borne not by the emitters, but by their customers, employees,
and investors. This is why several energy company CEOs have lined up behind the tax. They don't pay it. The automobile driver pays the
tax when she fills up at the pump. The worker pays it when he opens his paycheck. The retiree pays it when she receives her pension
check. The carbon tax does not in the end tax waste, but productive behavior. One recent study that looked at the effects on consumers of
carbon tax found that the costs -- largely in the form of more expensive gas and electricity -- would be up to eight times greater for the
poorest families than for the wealthiest. This means that in order for even a revenue-neutral carbon tax to be fair, far more tax revenues
would have to be diverted to the poor to make up for the effects of the tax than is currently the case. That in turn means significant cuts
in some government services to make up for the newly diverted revenue.
2. A revenue-neutral tax scheme is an impossibility for many reasons

2. A carbon tax that is perfectly offset by other tax cuts is neither a practical nor a political reality. The history and nature of politics
shows that once politicians institute a tax, they will not give it up. Still, some argue in favor of a tax swap to reduce income taxes
while implementing a new tax on carbon dioxide emissions. Theoretically, this could make sense. However, the argument does not
reflect political reality. The first challenge for promoters of a carbon tax tax swap is getting lawmakers to pass a carbon tax.
Lawmakers are very wary of imposing easily identifiable taxes across the entire population. Instead, politicians prefer to hide the costs of
government programs, while rewarding discrete and identifiable groups. Implementing carbon taxes would result in an identifiable tax
increase similar to the unpopular gas tax increases that led to voter displeasure revolts against President George H.W. Bush and
President Bill Clinton. The second challenge for promoters of a tax swap is getting Congress to reduce income taxes. Congress could
decrease some income taxes, but it is highly unlikely income taxes would be decreased for all income brackets. Taxpayers will likely
fight against a tax swap because they understand there is nothing to stop future lawmakers from increasing carbon taxes or returning
income taxes to their former levels. Worse, from a taxpayers perspective, a carbon tax will give lawmakers another vehicle to raise large
amounts of tax revenue. Some argue that a revenue-neutral tax swap would be economically beneficial. There is, however, little
evidence politicians are concerned about the economic effectiveness of plans to reduce carbon dioxide emissions. Most economists agree
that carbon taxes are a superior to cap and trade. Carbon taxes are more transparent, more understandable, and less subject to political
manipulation. Though economists prefer carbon taxes, congressmen strongly prefer cap and trade plans. Lawmakers have floated many
cap and trade proposals, but they have not discussed any serious carbon tax proposals. Lawmakers say they favor economically efficient
global warming plans, but their actions demonstrate that the discussion about efforts to reduce greenhouse gas emissions is not about
science or economicsit is about politics. Offsetting income taxes with carbon taxes is not a political reality because politicians will not
propose such obvious tax increases on all Americans.
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Carbon Tax Undesirable: Answers to Revenue Neutrality [contd]

3. Claims that a carbon tax will be revenue neutral are just a pipedream
In his December 29 piece for National Review Online, Irwin Stelzer tries to convince conservatives that they should support a carbon tax
because coupled with cuts in payroll taxes it would boost the economy. Stelzer thinks conservatives can put aside their differences
with Al Gore and other extreme environmentalists: A carbon tax, the title of the piece asserts, offers something for everyone.
However, this is not what the peer-reviewed economics literature says. There are several reasons that a carbon tax will not deliver the
boost to the economy that Stelzer and a few other conservative icons have been promising, even if its 100 percent revenue neutral.
Some of these reasons are straightforward, while others are quite subtle. First and most obvious: A carbon tax will most definitely not be
revenue neutral, and it will not be used to phase out existing regulations. Environmentalists have a long wish list of renewable-energy
and other green projects for which they will earmark at least some of the receipts from a major carbon tax. Furthermore, they are not
even pretending that they would be willing to trade a carbon tax for other policy concessions or to make it revenue neutral. Senator
Sheldon Whitehouse (D., R.I.), leader of the Senates carbon-tax coterie, has mused that revenues from a carbon tax should be returned
to the American people, but his actual proposal classifies increased federal spending as one way of doing that.
4. Revenue neutrality does not justify a carbon tax

Nor does describing a carbon tax as "revenue neutral" do anything to improve its appeal. Promising to use the revenue for tax cuts or a
rebate does not guarantee its best use or a net positive economic impact, nor does it make the policy somehow free. To the contrary, a
revenue-neutral tax is guaranteed to be costly precisely because it holds government revenue constant while also increasing costs to
private actors by driving them toward higher-cost energy technologies. The effect is most obvious in a world where the tax has driven
emissions to zero, and government revenue comes from all of its pre-tax sources, except consumers also find themselves motivated by
the tax's existence to pay the full cost of electric vehicles and solar panels. In this respect, the tax operates much like the minimum wage;
it imposes large and plainly government-created costs in the form of "off-budget" spending for which the government is never held
accountable.
5. It will not be revenue neutralgovernments will spend the money

Jim Johnston, policy advisor, Heartland Institute, Emissions Trading, Carbon taxes or Fuhgetaboutit, HEARTLAND
PERSPECTIVES, 1708, http://www.heartland.org/Article.cfm?artId=22584, accessed 1-1-16.
Notwithstanding the claims of supporters, the carbon tax is no boon to society, either. The basis would levy the carbon content of
principal energy sources, such as crude oil and natural gas at the wellhead. The tax would supposedly be passed forward to the final
consumer and not to employees or stockholders. The tax would supposedly be neutral, in the sense that the proceeds would be returned
to the economy generally in a way that would not further disrupt relative prices. While that might sound attractive, taxpayers would be
properly suspicious of whether such a rebate would actually take place. Once the government has the tax revenue, who really believes
that favored constituencies will not receive the proceeds so that the politicians will better their chances of getting reelected? A closer
look at the carbon tax proposal makes me suspicious. While energy producers would be taxed, countless numbers of projects to lock up
carbon, mainly in the agriculture sector, would receive tax credits. There is potential for a massive diversion of funds from energy
consumers to farmers. I suspect the politicians are hoping the sequestration tax credits will come just in time to replace the failed ethanol
subsidy.
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Carbon Tax Undesirable: Answers to Social Cost of Carbon

1. Social cost of carbon approaches are useless for forming public policy
A vigorous campaign aimed at American policymakers and the general public has tried to create the perception that a federal carbon tax
(or similar type of carbon price) is a crucial element in the urgently needed response to climate change. Within conservative and
libertarian circles, a small but vocal group of academics, analysts, and political officials are claiming that a revenueneutral carbon tax
swap could even deliver a double dividendmeaning that the conventional economy would be spurred in addition to any climate
benefits. The present study details several serious problems with these claims.. The actual economics of climate changeas summarized
in the peerreviewed literature as well as the U.N. and Obama Administration reportsreveal that the case for a U.S. carbon tax is
weaker than the public has been told. In the policy debate over carbon taxes, a key concept is the social cost of carbon, which is
defined as the (present value of) future damages caused by emitting an additional ton of carbon dioxide. Estimates of the SCC are
already being used to evaluate federal regulations, and will serve as the basis for any U.S. carbon tax. Yet the computer simulations used
to generate SCC estimates are largely arbitrary, with plausible adjustments in parameterssuch as the discount ratecausing the
estimate to shift by at least an order of magnitude. Indeed, MIT economist Robert Pindyck considers the whole process so fraught with
unwarranted precision that he has called such computer simulations close to useless for guiding policy.
2. Social cost of carbon justifications ignore leakage problems

Besides the arbitrariness and/or dubious choices for the major input parameters, another problem with use of the SCC as a guide to
setting carbon taxes is the problem of leakage. Strictly speaking, it would make sense (even in textbook theory) to calibrate only a
worldwide and uniformly enforced carbon tax to the SCC. If a carbon tax is applied only to certain jurisdictions, then emission cutbacks
in the affected region are partially offset by increased emissions (relative to the baseline) in the nonregulated regions. Depending on the
specifics, leakage can greatly increase the economic costs of achieving a desired climate goal, and thus the optimal carbon tax is lower
if applied unilaterally in limited jurisdictions. To get a sense of the magnitude of the problems of leakage, consider the results from
William Nordhaus, a pioneer in the economics of climate change, and creator of the DICE model (one of the three used by the Obama
Administration). After studying his 2007 model runs, Nordhaus reported that relative to the case of the entire globe enforcing the carbon
tax, to achieve a given environmental objective (such as a temperature ceiling or atmospheric concentration) with only 50 percent of
planetary emissions covered would involve an economic abatement cost penalty of 250 percent. Even if the top 15 countries (by
emissions) participated in the carbon tax program, covering threequarters of the globes emissions, Nordhaus still estimated that
compliance costs for a given objective would be 70 percent higher than for the fullcoverage baseline case. estimated that compliance
costs for a given objective would be 70 percent higher than for the fullcoverage baseline case. To see the tremendous problem of limited
participation from a different perspective, one can use the same model that EPA uses to calculate the effect of various policy proposals.
The Model for the Assessment of GreenhouseGas Induced Climate Change (MAGICC) is available and easytouse on the Cato
Institute website. MAGICC shows that even if the U.S. linearly reduced its emissions to zero by the year 2050, the average global
temperature in the year 2100 would be 0.1Cthats one tenth of a degreelower than would otherwise be the case. Note that this
calculation does not even take into account leakage, the fact that complete cessation of U.S. emissions would induce other nations to
increase their economic activities and hence emissions. Our point in using these results from the MAGICC modeling is not to christen
them as confident projections, but rather to show that even on their own terms, using an EPAendorsed model, American policymakers
have much less control over global climate change than they often imply.
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Carbon Tax Undesirable: Answers to Social Cost of Carbon [contd]

3. Social cost of carbon arguments should be discountedthey are based upon unreliable models
The social cost of carbon (SCC) is, in theory, a measure of the damage done to future economies from the emission of another ton of
CO2 for the year in which the CO2 is emitted. In concept, the CO2 emitted adds a warming effect to the atmosphere for the year in
which it was emitted as well as subsequent years (to varying degrees) for centuries to come. The added warming in each year will have
economic impacts from the warming and from sea-level rise. The present value of these damages is summed to get the social cost of
carbon for the year of emission. An interagency working group (IWG) produced a technical support document (TSD) in 2013 setting out
a schedule of SCC values by year and by the discount rate used in the present-value calculations. The IWG used three integrated
assessment models (IAMs) to estimate the SCC values for each year. Though interesting theoretical exercises, the information needed to
flesh out the IAMs does not exist. As a result the arbitrary values are inserted to paper over the missing critical information generating
useless output from technically sophisticated models. Others have noted these fatal problems with the IAMs. In addition, the IWG
ignored guidance from OMB regarding appropriate discount rates and did not use the most up to date equilibrium climate sensitivity
distributions. Heritage analyzed two of the three models used by the IWGthe DICE model and the FUND model. The proprietor of the
third model, PAGE, insists on the right of co-authorship for any publication using his model. Because this insistence seriously
compromises the independence of evaluating the model, Heritage did not do so. This also raises a question as to the propriety of basing
costly federal regulation, at least in part, on a model that cannot be rigorously and independently evaluated. When Heritage evaluated the
FUND and DICE models it was clear that the resulting SCC estimates were very sensitive to the choice of discount rates and equilibrium
climate sensitivity.
4. Social cost of carbon justifications assume the cost of climate change for the real worldthey do not justify a
U.S. response
It is important to note that the SCC reflects the estimated damages of climate change on the entire world. This means that if the SCC
(calculated in this fashion) is used in federal cost/benefit analyses, the analyst is contrasting benefits accruing mostly to nonAmericans
with costs borne mostly by Americans. Whether the reader thinks this is valid or not, it is clearly an important issue that has not been
made clear in the U.S. debate on climate change policy. In any event, the Office of Management and Budget (OMB), in its Circular A4,
clearly states that federal regulatory analyses should focus on domestic impacts: Your analysis should focus on benefits and costs that
accrue to citizens and residents of the United States. Where you choose to evaluate a regulation that is likely to have effects beyond the
borders of the United States, these effects should be reported separately. However, when the Obama Administrations Interagency
Working Group calculated the SCC, it ignored this clear OMB guideline, and only reported a global value of the SCC. Thus, if a
regulation (or carbon tax) is thought to reduce carbon dioxide emissions, then the estimated benefits (calculated with use of the SCC)
will vastly overstate the benefits to Americans. As an affluent nation, the U.S. economy is much less vulnerable to the vagaries of
weather and climate. Using two different approaches, the Working Group in 2010 determined that a range of values from 7 to 23
percent should be used to adjust the global SCC to calculate domestic effects. Reported domestic values should use this range (p. 11).
Therefore, following OMBs clear guideline on reporting the domestic impacts of proposed regulations, the SCC value would need to be
reduced anywhere from 77 to 93 percent, in order to show the benefit to Americans from stipulated reductions in carbon dioxide
emissions. To repeat, these figures all derive from the Obama Administrations own Working Group report.
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Carbon Tax Undesirable: Answers to Social Cost of Carbon [contd]

5. Social cost of carbon arguments are based on models that are easily manipulated
Yet to repeat, the problem with the SCC as a tool in policy analysis goes beyond quibbles over the proper parameter values. At least the
equilibrium climate sensitivity (ECS) is an objectively defined (in principle) feature of nature. In contrast, there are other parameters
needed to calculate the SCC that by their very essence are subjective, such as the analysts view on the proper weight to be given to the
welfare of future generations. Needless to say, this approach to measuring the SCC is hardly the way physicists estimate the mass of
the moon or the charge on an electron. To quote MIT economist Robert Pindyck (who favors a U.S. carbon tax) in his scathing Journal
of Economic Literature article: And here we see a major problem with IAMbased climate policy analysis: The modeler has a great deal
of freedom in choosing functional forms, parameter values, and other inputs, and different choices can give wildly different estimates of
the SCC and the optimal amount of abatement. You might think that some input choices are more reasonable or defensible than others,
but no, reasonable is very much in the eye of the modeler. Thus these models can be used to obtain almost any result one desires.
[Pindyck 2013, bold added.]7 To see just how significant some of the apparently innocuous assumptions can be, consider the latest
estimates of the SCC put out by the Obama Administrations Working Group. For an additional ton of emissions in the year 2015, using
a 3% discount rate the SCC is $36. However, if we use a 2.5% discount rate, the SCC rises to $56/ton, while a 5% discount rate yields a
SCC of only $11/ton. Note that this huge swing in the estimated social cost of carbon relies on the same underlying models of climate
change and economic growth; the only change is in adjustments of the discount rate which are quite plausible. Indeed, the
Administrations Working Group came under harsh criticism because it ignored explicit OMB guidance to include a 7 percent discount
rate in all federal cost/benefit analyses, presumably because the SCC at such a discount rate would be close to $0/ton or even negative.
185

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Carbon Tax: Index

Carbon Tax: Pro

Carbon Tax: Con

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Carbon Tax Undesirable: EconomyCapital Flight ..................................................................................... 120

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Carbon Tax: Introduction

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Paradigm Research 2015-2016

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Paradigm Research 2015-2016

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Carbon Tax: Definitions and Descriptions

2. Carbon tax defined, with rationale

3. Carbon taxes defined

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Carbon Tax: Definitions and Descriptions [contd]

5. Carbon taxes defined

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Carbon Tax Desirable: Topshelf

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Carbon Tax Desirable: Topshelf [contd]

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Carbon Tax Desirable: Air Pollution

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Carbon Tax Desirable: Budget Deficit / Revenue

2. Carbon taxes can be used to cut the deficit

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

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Carbon Tax Desirable: Budget Deficit / Revenue [contd]

6. Carbon taxes would help us balance the budget

7. A carbon tax will raise substantial revenuesCBO analysis proves

8. Carbon taxes will raise substantial revenues

Paradigm Research 2015-2016

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Carbon Tax Desirable: Budget Deficit / Revenue [contd]

Paradigm Research 2015-2016

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Carbon Tax Desirable: Business Confidence / Predictability

2. Carbon taxes are superiorbusiness certainty