Geoscience Reference
In-Depth Information
CARBON TAXES AND THE FISCAL PICTURE
Table 10 shows the aggregates for the U.S. economy based on the
prices used in Figure 33. For these calculations, I assume that CO 2
prices are raised by carbon taxes (but it could also be done by auction-
ing emissions allowances). The carbon tax analyzed here would start at
$25 per ton of CO 2 in 2015, assuming that the economy has attained
full employment at that time. It would raise substantial revenues, on
the order of 1 percent of GDP. Over the period to 2030, the tax would
cause U.S. emissions to stabilize at about the 2000 level. Models indi-
cate that this path of carbon prices, if met with parallel policies in all
other countries, would limit the global temperature increase to around
2 1 2 °C.
We generally think of energy and climate policy in isolation from
overall economic policy, but there is an important fi scal interaction.
Most major countries need to curb growing government debts, and a
carbon tax can make a major contribution to that effort.
I will illustrate this point for the United States. The Congressional
Budget Offi ce in 2012 estimated that the federal debt-GDP ratio will
rise from 36 percent in 2007 to 76 percent of GDP in 2013 . 9 The debt
ratio is increasing rapidly as a result of the collapse of revenues in the
current extended downturn, as well as the economic stimulus pro-
grams. The long-term outlook is for a rapidly rising debt ratio unless
major fi scal corrections are taken.
Table 10.
Economic impacts of proposed carbon tax, United States,
2010-2030.
Tax rate
(2005 $/ton CO 2 )
Emissions
(billion tons CO 2 )
Revenues
(2005 billion $)
Revenues
(% of GDP)
Year
2010
0
6.3
0
0.00
2015
25
5.9
147
0.96
2020
30
5.5
168
0.97
2025
42
5.4
225
1.14
2030
53
5.2
277
1.25
 
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