Why A National Carbon Tax Would Be Amazing — In Four Charts


Critics of a carbon tax inevitably claim it would kill jobs. But according to a new analysis, even a super-aggressive carbon tax would actually improve the economy, while also massively reducing the carbon dioxide America dumps into the atmosphere.

The report was commissioned by the Citizens Climate Lobby (CCL) and carried out by a joint effort by two firms with computer simulators that model both climate systems and the American economy. It looked at what would happen if the United States put a $10 tax on every metric ton of carbon emitted, with that tax increasing by $10 every year — a much more aggressive proposal than anything likely to pass the current Congress. Yet despite that ambition, CCL’s report turned up a 2.1 million increase in American jobs thanks to the policy, along with 13,000 premature deaths avoided and the elimination of one-third of the country’s carbon emissions by 2025.

Here are the four charts from CCL’s report that explain why it’s such an amazing idea:

Enormous Carbon Dioxide Reductions

The analysis used the 2013 Annual Energy Outlook (AEO), put out by the U.S. Energy Information Agency, as a baseline for what happens going forward if the country does nothing further to cut carbon emissions. That projection accounts for things like California’s new cap-and-trade system, new vehicle emissions standards, and certain EPA rules on pollutants. But it doesn’t include EPA’s new power plant rules.


At any rate, the baseline shows carbon dioxide emissions trucking along at over 5 billion metric tons annually for the foreseeable future. Add in CCL’s carbon tax, and emissions drop to around 4.5 billion metric tons in 2020 and 3 billion in 2030.

Those are enormous reductions. The country’s current goal for 2020 is to cut emissions 17 percent from where they were in 2005. This policy would cut them roughly 28 percent.

More Jobs For Americans.

A crucial aspect of CCL’s carbon tax proposal is what happens with the revenue: they give it right back. Every household, no matter its income level, gets a check for the same amount for each adult, and half that for the first two children under 18. It’s called a “fee and dividend” system, and both theoretical analysis and real world examples show that plowing the money back into the economy in this manner — or just cutting other taxes — all but eliminates any effect on the economy. But CCL’s result was even more dramatic: a modest improvement for the national economy.

Furthermore, even though energy is a bigger portion of poor Americans’ budgets, rich Americans still spend more on energy. So the net effect of the tax and the checks is that more money moves down the income ladder. That allows lower-income Americans to consume more, which drives up jobs in industries that tend to employ poorer workers. And the tax itself drives consumption and employment away from fossil-fuel-heavy industries and into less heavy ones.


The overall result is more employment for every portion of the income ladder, but with the biggest gains for the poorest workers.

More Income For Americans

The dynamics of the carbon tax that drive higher employment also drive increases in real disposable personal income (RDPI). The “real” part is critical: RDPI measures how much money individuals and households have to burn after accounting for the increases they’d see in their cost of living thanks to higher energy prices. CCL’s projection found the average American’s RDPI would be almost $800 higher per year by 2035.

Better Health For Americans

Cutting carbon dioxide emissions inevitably reduces other pollutants put out by burning fossil fuels. Those include things like sulfur dioxide, nitrogen oxides, and particulate matter, all of which drive up asthma attacks, cardiovascular disease, and premature deaths. As a result, REMI’s model shows the carbon tax would also reduce annual premature deaths by roughly 14,000 a year by the 2030s.

The acronyms on the right refer to different regions of the country, which are laid out in the report.

Those health improvements also come with economic benefits, since people are spending less on hospital visits and medical needs, and because healthier workers are more productive workers. So the carbon tax’s health improvements alone would add almost $90 billion per year to the economy by the 2030s.

There Are Regional Differences

Admittedly, these are national results. There would be regional variations, which the report examines. For example, REMI’s projections show a slight negative hit to job creation in the central southern states of Texas, Oklahoma, Louisiana, and Arkansas — thanks to how heavily their economies rely on fossil fuel extraction. But all the other regions see gains. Those same states would also see a small net drop in their total RDPI, but part of that is also population shifts.


Overall, CCL’s report shows a carbon tax plus a fee and dividend system is beneficial to an amazingly wide swathe of America. It would not only cut carbon dioxide emissions far more than politicians are currently contemplating — it would do so while making America’s workers better off.

Politicians, experts, interest groups, and voters across the political spectrum have already said they’re on board with the idea, thanks to the way the tax world work with market forces to reduce emissions. And with the ongoing political and legal fight over the Environmental Protection Agency’s new carbon emission rules for power plants, a carbon tax could serve as a bipartisan alternative.