Study: 'Win-Win-Win' Carbon Tax Could Bolster Economy, Cut Pollution

A carbon tax plan would cut emissions by more than 20 percent by 2050 and generate as much as $1.5 trillion in revenue over 10 years, according to the study. (Reuters)

Study: 'Win-Win-Win' Carbon Tax Could Bolster Economy, Cut Pollution

While noting the raising taxes is never embraced by the mainstream of US politics, a new study released by researchers at MIT on the impact of a national carbon tax claims that such a scheme could be "a potentially a win-win-win solution."

Using a baseline scenario provided by the Congressional Budget Office, where a $20 per ton of carbon tax would be levied, the MIT Global Change Institute report by Sebastian Rausch and John Reilly suggests that revenue totals generated by the tax could reach $1.5 trillion over ten years.

The money, the report argues, would allow for "revenue-neutral relief on personal income taxes, corporate income tax, or payroll taxes, or could be used to avoid or limit cuts to social programs (Medicare, Medicaid, Social Security, Food Assistance)." Second, the report's economic analysis demonstrates the potential for a "tax interaction effect" whereby recycling of revenue from a carbon tax would offset other taxes or boost economic welfare. And, third, a carbon tax would lower fossil fuel use, reducing carbon dioxide emissions; and lowering oil imports.

This last "win"--as the authors championed in an op-ed ahead of their study's release on Monday-- would be "a win for our future health, security and prosperity."

According to Rausch and Reilly, the plan "would cut emissions by more than 20 percent by 2050, while keeping oil imports from rising. With this economically beneficial approach, the U.S. could lead the way to a global solution for carbon emissions rather than stand in the way."

And, they continue, a carbon tax would help shift the fossil fuel-driven economy away from dirty and dangerous fuels and extraction methods like tar sands and natural gas fracturing and towards cleaner and renewable sources of energy. "This shift," they say, "would happen in a way that makes economic sense: By making dirtier sources more expensive and raising revenue rather than spending it through narrow tax incentives."

Political traction for a carbon tax plans have stalled repeatedly in Congress, but Rep. Jim McDermott (D-WA) recently filed a bill which the Carbon Tax Center, an advocate of a strong carbon policy, says "would reduce greenhouse gas emissions almost twice as much as the most optimistic projections for prospective EPA regulations or the targets in the Waxman-Markey bill passed by the House in 2009 but dropped in the Senate the following year."

"Congress will face many difficult tradeoffs in stimulating the economy and job growth while reducing the deficit," said Reilly in a statement. "But with the carbon tax there are virtually no serious tradeoffs. Our analysis shows the overall economy improves, taxes are lower and pollution emissions are reduced."

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