Economic Outcomes of a US Carbon Tax

17 February 2013
Dr. Anne E. Smith, Dr. David Harrison, Scott Bloomberg, Dr. Sugandha Tuladhar, et al.

In this report, prepared for the National Association of Manufacturers, a NERA team led by Senior Vice Presidents Dr. Anne E. Smith and Dr. David Harrison evaluates the potential impacts on the US economy from possible future carbon taxes whose revenues would be devoted to a combination of debt and tax rate reduction. NERA's project team -- which also included Senior Vice President Dr. W. David Montgomery, Vice Presidents Dr. Paul Bernstein, Scott Bloomberg, and Dr. Sugandha Tuladhar, Consultant Sebastian Mankowski, and former Senior Consultant Dr. Mei Yuan -- used NERA's NewERA model to develop estimates of the effects of a carbon tax on the US economy as well as on emissions and energy markets. Such economic consequences are important so that the economic effects of a specific carbon tax policy can be compared to estimates of the environmental effects of the policy. The results take into account the varied economic effects of fossil fuel cost increases due to a carbon tax as well as the positive economic effects of the assumption that carbon tax revenues would be used to reduce Federal government debt and Federal taxes.