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.
The report itself is a major step as it marks another milestone in the debate over regulations greenhouse gas emissions in the US Sadly though, it remains only a debate with no concrete action expected in the foreseeable future. Earlier this year, the Senate voted down a proposal which would have opened up a possibility of implementing a revenue-neutral carbon tax. Also, the White House has categorically stated that it has no intention of implementing a carbon tax.
The chief climate change negotiator for the US is believed to have proposed that countries around the world take up emissions reduction targets and adopt the means to achieve those targets according to their will and capacity instead of being directed by an international agreement. This may be looked as an attempt to derail the global effort to finalise a climate change treaty by 2015 but the US is bound to feel the peer pressure soon.
Both India and China have announced that they are studying options to cap their absolute emissions. While China has proposed that it would start regulating its emissions from 2016, India may do so from 2020 when the new climate change treaty is supposed to be implemented. But the EU and Australia remains the foci of uncertainty.
With a less-than-inspiring global situation and a Republican majority in the legislature which doubts the whole process of climate change, it seems that this and some more future administrations would continue to drag feet on the issue of substantially reducing America’s greenhouse gas emissions.
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