Full Title: Carbon regulations vs. a carbon tax: A comparison of the macroeconomic impacts
Author(s): EY Global
Publisher(s): Alliance for Market Solutions
Publication Date:


Description (excerpt):

This report compares the economic impact of replacing a fully implemented version of existing
US carbon emission regulations with a carbon tax. The regulatory approach would reduce carbon
emissions 22% relative to a baseline that includes no carbon emissions policies. The report finds
that placing a uniform price on carbon emissions is a less costly means of achieving the same
reduction in carbon emissions.

1. The existing regulatory approach is estimated to reduce gross domestic product (GDP) in
the long-run by, on average, $1,770 per household annually.
2. A revenue-neutral carbon tax could increase GDP in the long-run by, on average, as much
as $5,090 per household annually, relative to the existing regulatory approach.
A key determinant of the long-run economic impact of a carbon tax is the use of the revenue. This
analysis estimates three alternatives:
1. Permanent extension of the Tax Cuts and Jobs Act (TCJA), which would produce the
largest estimated GDP impact, a 3.2% increase in long-run GDP.
2. Investment in public infrastructure, which would yield an estimated 2.1% increase in longrun
3. Rebate to households, which would result in an estimated 0.7% increase in long-run GDP.