The research team used an economic model developed at MIT to assess the impacts of different policies on the world’s likely climate trajectory, and combined that with a model of the nation’s electrical system, developed at NREL. The team created a detailed assessment of the way different policies would affect decisions by the power producers and distributors. It can’t be ignored that change can most immediately come from the electricity sector when it comes to reducing emissions, because it’s the biggest emitter of CO2.
When looking at the economic models for what a carbon tax might look like, the research group started with two values: $25 and $50 per ton of CO2 emissions (the average U.S. car emits seven tons of carbon a year). They also looked at two taxation rates: 1 percent and 5 percent. Finally, they looked at three ways to spend the tax revenue — household rebates, tax breaks for individuals, or corporate tax breaks.
The team found that $50 per ton and a 5 percent tax produced the greatest emissions reductions, as one would expect, but interestingly, even the lowest tax rates could lead to reductions sufficient to meet the United States’ now-scrapped commitment to the Paris Agreement on climate change, a pact on which President Donald Trump has back-tracked but to which several individual cities remain committed.
What’s more, a carbon tax could benefit politically liberal and conservative-minded people. It all comes down to how the tax money is spent, says John Reilly, who is a senior lecturer at MIT’s Sloan School of Management.
Of course, those who are opposed to all taxes of any sort, or those who strongly believe — perhaps in the face of economic research to the contrary — that taxes unfairly hold back business growth, may be immovable.
Reilly puts it like this to Inverse:
“Bottom line: you can say almost nothing about the impact of a carbon tax on households of different income levels until you know what will happen with the revenue.
“The other thing to consider is that there is great diversity among households in terms of their energy expenses and possible effects on wages/employment.
“Coal miners in West Virginia with significant commuting and heating costs, will have high energy costs and may lose their job. Someone living in a mild climate, with low commuting costs will have much lower energy costs.
“So considering job training or economic development assistance in communities dependent on fossil energy jobs, or assistance for energy costs in areas with high heating or air conditioning costs could be considered.
Reilly’s comments illustrate the challenge ahead for advocates of a carbon tax, as does the below map released by the Carbon Tax Center last year.
The road ahead for a CO2 tax looks rough, but it seems that if the narrative can be shifted to a story of what will be done with the money, a carbon tax may see a clearer path passage.