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It’s Time for a Carbon Tax

* By: Andrew Zhang

Most Americans are worried about global warming.[1] Unfortunately, our actions do not reflect that worry. In 2019, 6,558 metric tons of carbon dioxide equivalents (the total global warming potential of all greenhouse gases adjusted to the potential of carbon dioxide) were emitted into the atmosphere from the United States, representing a two percent increase from 1990.[2] As a result, emissions have begun to exceed the capacity of natural processes that absorb carbon dioxide.[3] Largely due to human activity, the climate has warmed by 1.53 degrees Fahrenheit since 1880.[4]

 A carbon tax is a policy that charges a fee for every ton of carbon dioxide emitted. The transportation, industrial, and electrical industries are the three industries with the highest carbon dioxide emissions.[5] Combining for over 75% of the country’s emissions, those industries would feel the brunt of a carbon tax.[6] However, the effects of a carbon tax even trickle down to the individual level. Homeowners would experience the tax as an increase to their electrical bill. Everyone is incentivized to find ways to reduce their emissions in order to pay less taxes. Big industries will look for greener solutions and individuals will have to figure out how much electricity they actually need to use.

Other countries have begun trying carbon taxes. The biggest success story is Sweden, which has seen a 26% drop in emissions since 1990.[7] That success could also happen in the United States. Columbia University’s Center of Global Energy Policy estimates that with a carbon tax of fifty dollars per ton, emissions in the United States could be reduced by 46% before 2030.[8]

Despite its benefits, a carbon tax is difficult to implement because people are unwilling to buy into it. Nobody likes taxes, so introducing a new one is never going to be a popular decision. Australia enacted a carbon tax in 2012 and saw instant emission decreases.[9]  However, protests from individuals and businesses led to its repeal only two years later, which led to rising emissions in turn.[10]

Designing an effective carbon tax can also prove to be a daunting task. Three considerations need to be addressed. Perhaps most importantly, the policymakers need to choose the rate of the tax. The smaller the tax, the less of an effect that it will have. On the flipside, higher taxes lead to even less popular support. Some policymakers have suggested a gradual tax increase as the solution. Under that system, the carbon tax rate would start low and slowly increase every year based on emissions outcomes of that year.[11] Starting tax rates from proposed carbon taxes have ranged from 10 dollars per ton to 55 dollars per ton.[12]

Another consideration when designing a carbon tax is the allocation of the ensuing revenue. Proposed carbon tax policies have identified multiple ways to use the extra revenue, including further climate change mitigation, deficit reduction, tax cuts, and dividends.[13] Tax cuts and dividends are particularly of interest for anyone who opposes the carbon tax due to the increased cost. If the revenue from the carbon tax is used to reduce other taxes or to give out dividend checks to individuals, then the cost of the carbon tax would be mitigated.

The final consideration when it comes to carbon tax design is the scope and coverage of the tax. Some industries are necessary and should be given exemptions to the carbon tax. A large sweep of industries would lead to overall less emissions, or a lower rate for everyone. However, the wider the net that the carbon tax uses, the more opposition that can be expected for the policy to be implemented. Previously proposed tax policies have been wide sweeping but have indicated certain industries that would remain untouched by the carbon tax. One example of this is the lack of taxation against military fuel use in the 2019 Energy Innovation and Carbon Dividend Act.[14]

In an ideal world, a carbon tax is a perfect solution to rising emissions in the United States. It taxes the use of carbon, redistributes revenue back to taxpayers, and promotes greener solutions. In reality, it’s hard to design and to gather support for a carbon tax. However, a well-designed bill can avoid the cost problem by gradually increasing the rate, using the revenue for redistribution, and having an economy-wide scope to have lower rates. More importantly, the cost of not having a carbon tax and allowing for global warming to continue at its current pace is far greater.[15]

* Andrew Zhang is a Junior Editor on MJEAl. They can be reached via email at andrewxz@umich.edu.

The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.


[1] Lydia Saad, Are Americans Worried About Global Warming, Gallup News, October 5, 2021, https://news.gallup.com/poll/355427/americans-concerned-global-warming.aspx

[2] EPA, Climate Change Indicators: U.S. Greenhouse Gas Emissions, 2019, https://www.epa.gov/climate-indicators/climate-change-indicators-us-greenhouse-gas-emissions#:~:text=In%202019%2C%20U.S.%20greenhouse%20gas,2005%20(see%20Figure%201).

[3] EIA, Energy and the Environment Explained, December 8, 2021, https://www.eia.gov/energyexplained/energy-and-the-environment/greenhouse-gases-and-the-climate.php

[4] Id.

[5] EPA, Sources of Greenhouse Gas Emissions, 2019, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

[6] Id.

[7] World Wildlife, What is a Carbon Tax and how it Could Help us Fight the Climate Crisis, December 10, 2019, https://www.worldwildlife.org/stories/what-is-a-carbon-tax-and-how-could-it-help-us-fight-the-climate-crisis#:~:text=A%20carbon%20tax%20helps%20load,cleaner%20and%20more%20prosperous%20future.

[8] Columbia University, What You Need to Know About a Carbon Tax in the United States, https://www.energypolicy.columbia.edu/what-you-need-know-about-federal-carbon-tax-united-states

[9] World Wildlife, What is a Carbon Tax and how it Could Help us Fight the Climate Crisis, December 10, 2019, https://www.worldwildlife.org/stories/what-is-a-carbon-tax-and-how-could-it-help-us-fight-the-climate-crisis#:~:text=A%20carbon%20tax%20helps%20load,cleaner%20and%20more%20prosperous%20future.

[10] Id.

[11] Columbia University, What You Need to Know About a Carbon Tax in the United States, https://www.energypolicy.columbia.edu/what-you-need-know-about-federal-carbon-tax-united-states

[12] Id.

[13] Id.

[14] H.R. 763 § 9908

[15] Tree Hugger, The Cost of Tackling Climate Change Is Less Than the Cost of Doing Nothing, August 19, 2021, https://www.treehugger.com/tackling-climate-change-will-help-economy-when-we-need-it-most-4865281#:~:text=In%20an%20article%20in%20the,as%20%24792%20trillion%20by%202100.

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