Carbon Tax Good For Climate And Economy, Says US Congressional Budget Office
May 25 2013 Guest Contributor
The US Congressional Budget Office has completed its study of impact of carbon tax on the US economy. The CBO was given the tax to assess the impact of carbon tax on fossil fuels on the US economy and the country’s greenhouse gas emissions. In its second report on the subject, the CBO has given elaborate description of what a possible carbon tax regime could look like.
The report seems extremely balanced as it elaborates the findings one step at a time without jumping to conclusions. One of the significant findings of the report is that while the share of US’ greenhouse gas emissions in the world would reduce to 15% from the current levels of 18%, it is important that efforts are made to reduce them. It says that it is important to do so to prevent “potentially catastrophic damage.”
As mentioned in an earlier report, the CBO estimates that a $20 per tonne tax on carbon dioxide emissions would yield revenue of $1.3 trillion over a period of 10 years. The emissions would also reduce by 8% during this period.
The report states that levying a carbon tax would certainly have an impact on the consumer prices which may have a cascading effect on the overall national economic growth. However, this damage can be countered by using the carbon tax revenue to a) reduce the fiscal deficit and b) reduce income tax and other taxes to support businesses and consumers. Thus, a revenue-neutral carbon tax may prove beneficial to the environment as well as the economy.
Next, the CBO has stated the possible points of implementation of carbon tax on fossil fuels – coal, oil and natural gas. It has been suggested the miners and well operators or the electricity generators can be placed under the carbon tax regime. This procedure would be convenient as reporting and monitoring process is well established at these points.