Full Title: Effects of a Carbon Tax on the Economy and the Environment
Author(s): Congressional Budget Office
Publisher(s): Congressional Budget Office
Publication Date: 5/2013



Lawmakers could increase federal revenues and encourage  reductions in emissions of carbon dioxide (CO2) by  establishing a carbon tax, which would either tax those  emissions directly or tax fuels that release CO2 when they  are burned (fossil fuels, such as coal, oil, and natural gas).  Emissions of CO2 and other greenhouse gases accumulate  in the atmosphere and contribute to climate change—a  long-term and potentially very costly global problem.

The effects of a carbon tax on the U.S. economy would  depend on how the revenues from the tax were used.  Options include using the revenues to reduce budget  deficits, to decrease existing marginal tax rates (the rates  on an additional dollar of income), or to offset the costs  that a carbon tax would impose on certain groups of  people. This study examines how a carbon tax, combined  with those alternative uses of the revenues, might affect the economy and the environment.