Aug 16, 2019 - Energy & Environment

New working paper makes case for "modest" carbon taxes

Data: Knittel, 2019; Chart: Harry Stevens/Axios
Data: Knittel, 2019; Chart: Harry Stevens/Axios

Even "modest" carbon taxes, like those seen in the chart above, would cut emissions as much as the Obama-era vehicle and power plant rules that President Trump is abandoning, an MIT economist found in a new working paper.

Why it matters: The results "underscore the economic power of a carbon tax" compared to "economically inefficient" regulations, writes Christopher Knittel, who directs the MIT Center for Energy and Environmental Policy Research.

The big picture: The pro-tax argument arrives as Democratic 2020 hopefuls are tossing around plans to revive and toughen Obama-era initiatives, while lawmakers from both parties have recently floated CO2 tax bills.

Driving the news: The new paper attempts to calculate what level of taxes on CO2 or greenhouses gases more broadly would provide emissions cuts equivalent to these 3 major policies combined:

  • Auto mileage standards imposed by the Obama administration.
  • President Obama's Clean Power Plan for electricity (which never took effect).
  • A 2007 law that expanded the national biofuels mandate.

But, but, but: Carbon taxes have very little traction among Republican lawmakers despite a few members' recent efforts.

  • And they've got limited cachet among progressive climate activists these days, at least as a primary weapon against global warming.
  • Leading Democratic contenders — even the ones who support carbon pricing or are open to it — aren't emphasizing them either.

Of note: The paper is limited in scope. It's exploring emissions cuts that are too small to deeply decarbonize the U.S. economy, or even achieve the U.S. goals under the Paris agreement.

  • As the Rhodium Group consultancy has noted in the past, even the wider suite of Obama policies would not have met the Paris pledge his administration submitted of a 26%–28% cut in U.S. GHG emissions by 2025.
  • However, Knittel cautioned against inferring that extremely high taxes would be needed to achieve steep emissions cuts.
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