On the Economics of a Carbon Tax for the United States

Climate change is driven by the buildup of greenhouse gases (GHGs) in the atmosphere, which is predominantly the result of the world's consumption of fossil fuels. GHGs are a global pollution externality for which a global solution is required. I describe the role a domestic carbon tax could play in reducing U.S. emissions and compare and contrast alternative approaches to reducing our GHG pollution. Carbon taxes have been implemented in 23 jurisdictions around the world. I provide evidence on emission reductions and the economic impact of British Columbia's carbon tax, a broad-based carbon assessment that has been in effect for over a decade. I also provide an analysis of carbon taxes used in the countries that belong to the European Union.