What Next?

This brief chapter moves from explaining why a carbon tax is smart policy to showing how the reader can learn more and get engaged in shaping the policy debate. It provides information for individuals or groups interested in taking action on a carbon tax. It provides links to various groups that carry out research on climate policy that should inform policy making as well as to groups working to enact a carbon tax. It also explains how to engage with politicians and encourages readers to reach out to their Representatives and Senators to support smart climate policy like a carbon tax.

So You Want a Carbon Tax: How Do You Design It?

This chapter reviews the nuts and bolts of implementing a carbon tax. Invoking principles of administrative simplicity, ease of compliance, and avoidance of design features that dilute the price signal, it gives practical advice on who should be responsible for collecting the tax and remitting it to the government. It explains how the tax should handle the possibility that we can capture and permanently store carbon dioxide emissions and how we should tax emissions related to internationally traded goods so the United States is not disadvantaged in global trade. Finally, it identifies, and warns policymakers away from, various pitfalls in carbon tax design.

Isn’t There a Better Way? (No, There Isn’t)

This chapter reviews alternative approaches to putting a price on pollution to control greenhouse gas emissions. It reviews the history of the Clean Air Act and Corporate Average Fuel Economy (CAFE) standards and demonstrates that these policies cut pollution at a much higher cost than by simply putting a price on pollution. It also reviews subsidies for clean energy, state-level renewable portfolio standards, and information and voluntary programs and demonstrates that a carbon tax is superior to any of these alternatives.

Climate Change: What’s the Big Deal?

Droughts, floods, soaring temperatures, sea-level rise, and melting ice are just some of the damages brought about by climate change. Chapter 1 details the cost of our failure to cut our emissions, from crop-destroying droughts to devastating floods. It also documents the inexorable build-up of greenhouse gases in the atmosphere as demonstrated by the Keeling curve and observations from Antarctic ice core samples. The chapter then provides a brief history of the science linking the build-up of atmospheric greenhouse gases and climate damages.

What to Do with $200 Billion: Give It Back

This chapter discusses how economists measure the burden of a carbon tax—which households have less spending power because of the tax. It also discusses fairness in the tax code and how the revenue, which can be substantial, from a carbon tax can be returned to households and businesses in ways that enhance the fairness and efficiency of the overall tax system. A common belief is that a carbon tax is regressive—that it disproportionately burdens poor households. Studies discussed in this chapter refute this belief and argue that judicious use of the carbon tax revenue can make a carbon tax reform (tax and return of the revenue) even more progressive.

Business as Usual: What Are the Costs?

This chapter describes the additional damages we will face if we don’t cut our carbon pollution. More frequent occurrences of extreme weather will cause more damages. We will also have to pay for stronger climate-proof infrastructure to adapt to new weather conditions and change our lifestyles to stay out of harm’s way. The chapter also addresses the uncertainties of climate change and suggests a way for climate skeptics to think about climate change. The example of Pascal’s Wager is used to illustrate why it is riskier not to act on climate change even in the face of uncertainty about the magnitude of the damages.

Enacting a Carbon Tax: How Do We Get There?

The final chapter lays out a policy framework for building political support to enact a carbon tax. The framework can focus policymakers on the task at hand and instill discipline in the legislative process. The carbon tax should be revenue neutral, contribute to fairness in the tax system, streamline climate policy, and lead to significant emission reductions over time. The chapter goes on to explain why those are key elements of a policy framework through which bipartisan support for a carbon tax could be possible.

Objections to a Carbon Tax

This chapter addresses common objections to a carbon tax including whether the science is settled enough to put a price on greenhouse gas emissions, whether the tax will hurt economic growth, or whether the tax will kill jobs. It dispels a number of myths about climate policy and coal mining while making the case for providing transitional relief to coal miners and other groups particularly hard hit by the tax. It also discusses how the tax can be designed to ensure that long-term emission reduction goals are met.

Cap and Trade: The Other Way to Price Pollution

This chapter reviews another way to put a price on pollution: establishing a cap and trade program. It describes what cap and trade is, how it puts a price on pollution, and its use around the world. The chapter then goes on to make a case for why a carbon tax is a better approach than cap and trade for pricing carbon pollution in the United States. While either cap and trade or a carbon tax is preferable to the other options discussed in chapter 4, a carbon tax still has significant advantages over cap and trade.

Why Do Economists Like a Carbon Tax?

In non-technical language, the chapter explains why economists favor putting a price on pollution as the least expensive way to cut pollution to its socially optimal level. Using a pollution example from nineteenth-century British law made famous by the Chicago economist Ronald Coase, the chapter lays out the principles for good environmental policy and shows how a carbon tax fits with those principles. It introduces Arthur C. Pigou, an early twentieth-century economist who saw that a tax on pollution could use the power of the market to solve the pollution problem. It then demonstrates that carbon taxes in British Columbia and Sweden have not harmed their economies but have helped reduce carbon pollution.