Instituting a revenue-neutral carbon tax in the United States would use market forces to incentivize emissions reductions at a lower cost than other proposed policies.
Under a well-structured carbon tax—for example, one starting now at $16 per ton and rising 4% per year through 2050—impacts on consumers would be modest, initially resulting in about $8 per month per household in higher utility bills and some 16 cents per gallon in steeper gasoline fees. Consumers already experience fluctuating costs of this order as markets rise and fall.
Market forces would incentivize emissions reductions to occur at the lowest cost as well as promote the needed investments in R&D on low-carbon technology. And the certainty of these extra costs would allow citizens and businesses to plan accordingly, increasing their energy efficiency to keep their expenses stable.
A carbon tax would go a long way in the effort to slow emissions and lessen the impacts of climate change. Economists estimate a carbon tax of this order would reduce U.S. emissions by about one-third.
Current climate regulations—such as renewable portfolio standards, subsidies and various EPA regulations—can all be viewed as alternate forms of a tax, but they are an invisible and less efficient tax. If a carbon tax replaces these current measures, it would actually reduce the reach of the government and increase economic efficiency.