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This paper describes a carbon tax swap that is both revenue and distributionally neutral. The tax swap would levy a tax on greenhouse gas emissions. The revenue would be used to fund a reduction in the income tax, tied to earned income. Specifically, the proposal calls for a tax on greenhouse gas emissions at an initial rate of $15 per ton of carbon dioxide equivalent and gradually increasing over time. A refundable tax credit would be offered for sequestered greenhouse gases and other approved sequestration activities. In addition, to offset the new carbon tax, the proposal would implement an environmental tax credit in the personal income tax equal to the employer and employee payroll taxes on initial earnings up to a limit. This paper begins with a discussion of the problem of greenhouse gas emissions and provides a rationale for setting a price on carbon emissions. It then provides a distributional analysis of the proposal described above. Following this analysis, it makes a case for why carbon pricing through a tax should be considered a viable alternative to carbon pricing through a cap-and-trade system. It concludes with a response to various objections made to carbon pricing in general and a carbon tax in particular. [ABSTRACT FROM AUTHOR]

The European Union's (EU's) Emissions Trading System (ETS) is a cornerstone of the EU's efforts to meet its obligation under the Kyoto Protocol. It covers more than 11,500 energy intensive facilities across the 25 EU member countries, including oil refineries, powerplants over 20 megawatts (MW) in capacity, coke ovens, and iron and steel plants, along with cement, glass, lime, brick, ceramics, and pulp and paper installations. Covered entities emit about 45% of the EU's carbon dioxide emissions. The trading program does not cover emissions of non-CO2 greenhouse gases, which account for about 20% of the EU's total greenhouse gas emissions. The first trading period began January 1, 2005. A second trading period is scheduled to begin in 2008, with a third one planned for 2013. In deciding on its trading program, the European Commission (EC) adopted a "learning-by-doing" approach to prepare the EU for the Kyoto Protocol's emission limitations. The EU does not have major experience with emissions trading, and the EC felt that an initial program beginning in 2005 would give the EU practical familiarity in operating such a system. At first glance, it would appear that the EU may have little difficulty meeting its Kyoto Protocol requirements during the second trading period. The anticipated deficit between the second trading period for the original 15 Member States can be covered by trading with the 10 newer Member States that anticipate a surplus. Also, credits are likely to be available through Joint Implementation (JI) and Clean Development Mechanism (CDM) projects sanctioned under the Protocol. However, there are other considerations. The availability of surplus credits created via JI and CDM is restricted by the EC requirement that such credits be "supplemental" to a country's domestic efforts. Each country is to spell out what "supplemental" means in its National Allocation Plans (NAPs) for the second trading period. Individual countries are likely to define that term differently -- restricting allowance trades and purchases in some countries. Another consideration is the overall commitment of the Kyoto Protocol. As noted earlier, the ETS covers only a percentage of the overall greenhouse gas emissions in the various Member States of the EU. Some sectors not covered by the ETS may grow faster than sectors covered by it, creating difficulties for compliance. In particular, the transportation area is already a source of concern. A final consideration for the ETS is its suitability for directing long-term investment toward a low-carbon future -- the ultimate goal of any climate change program. It is too early to tell whether the ETS's market signal and individual countries' NAPs will move investment in the appropriate direction. The early signs are not particularly encouraging, with the 2005-2008 NAPs producing an overallocation of allowances and one major Member State (Germany) attempting to direct its second NAP toward carbon-intensive, coal-fired electric-generating facilities rather than low-carbon alternatives. Reluctance by countries to redirect their NAPs and an inconsistent price signal from the ETS make the long-term effect of the ETS uncertain. [ABSTRACT FROM AUTHOR]

Executive Summary The Republican leadership in the House of Representatives released recently a set of policy proposals ostensibly designed to address the potential dangers of anthropogenic climate change. These proposals appear to be driven by perceived political imperatives perhaps revealed by polling data, and at least in substantial part by many of the same assumptions about climate phenomena, both current and prospective, underlying the 'net-zero' emission proposals of the more-alarmist proponents of climate policies, one example of which is the Green New Deal. The House Republicans propose two sets of policy initiatives: (1) subsidies and other policy support for formal US participation in the international 'trillion trees' initiative and (2) subsidies and other policy support for capturing and sequestering carbon dioxide from enhanced oil recovery, from natural gas power production, and through direct extraction from the air. The US component of the trillion trees effort, based on the demonstrated absorption effect of trees on carbon dioxide from the atmosphere, would have a near-zero effect--a bit less than 1/100th of a degree C--on temperatures by 2100, based on straightforward modeling with the climate model used by the Environmental Protection Agency. Moreover, because forest canopies are dark as a crude generalization, expansion of forests would be likely to reduce global 'albedo' (reflective) effects on solar radiation; the scientific literature suggests a net warming effect for most regions. Even ignoring the albedo issue, the costs of this effort would not be trivial; it could not satisfy any plausible benefit/cost test in terms of its stated objectives. The same is true for an expanded effort to capture and sequester carbon dioxide. It would yield climate effects effectively equal to zero and would be very expensive. Under conservative assumptions, the plant capital costs of such an effort for the electric power sector alone would be $182 billion per year. Republican policy proposals based on 'alarmist' assumptions are unlikely to prove salutary. If anthropogenic climate change represents an 'existential threat,' then no cost is too large and no benefit is too small for given policy proposals, and proponents of climate policies purportedly more 'sensible' inexorably will be driven to negotiate with themselves over how far toward the alarmist view they are willing to move. Instead, an alternative policy stance supported by the actual climate evidence and straightforward benefit/cost analysis is available. It comprises the following central components. * Any plausible policy to reduce greenhouse gas emissions, whether implemented by the US alone or all nations collectively, would yield by 2100 climate effects effectively equal to zero. * At the same time, the costs of such policies would be very large and inflicted disproportionately on the world's poor. * Anthropogenic climate change is real, but natural processes too affect climate phenomena. The scientific literature suggests that mankind is responsible for about one-third of the approximate 1.5 degrees C of warming since 1850. * There is substantial evidence that increasing carbon dioxide concentrations yield both risks and important benefits, and the unanticipated adverse effects of government policies should not be discounted. * The body of evidence on climate phenomena does not support the 'crisis' or 'existential threat' assertions commonly heard in the public debate. Many of those arguments are based on model projections driven by implausible underlying assumptions, while others are simply assertions made ex nihilo. * There is no 'consensus' among scientists about climate science, whether at the 97 percent level commonly asserted or any other number. Moreover, scientific 'truth' is not majoritarian, and scientists in any event are not entitled to deference with respect to their policy views. * Climate policies, whether explicitly or implicitly, are intended to reduce the use of fossil fuels by increasing their relative perceived costs. The historical increase in the use of fossil fuels has driven advances in human well-being, while increases in individual incomes have expanded the demand for fossil fuels significantly Opposition to fossil fuels implies a reduction in policies--education, training, health care, and the like--that add to human capital and so increase incomes and the demand for conventional energy. Therefore, opposition to fossil fuels is fundamentally antihuman. * The uncertainties about shifts in future climate phenomena, whether anthropogenic or natural, are large, and any plausible policy action to affect them by reducing greenhouse gas emissions would yield trivial effects while imposing large costs. The most sensible policy approach moving forward comprises watchful waiting, adaptation over time, and ongoing investment in resilience against the future effects of climactic changes. Such an approach would be very different from 'doing nothing.', It is of no small interest that President Donald Trump--a man driven by instincts rather than analytic insight, a man unimpressed with scientific 'truth' based on majoritarianism among experts, and [...]

The article describes scenarios under which voluntary buyers could buy and cancel allowances from compliance markets as an alternative to offsets. It cites examples of cancellation of tradable compliance units such as carbon dioxide allowances from the European Union Emissions Trading System (EU-ETS) and the Regional Greenhouse Gas Initiative (RGGI). It assesses the advantages and disadvantages of cancelling tradable compliance units.

The article discusses the expected social and individual benefits and potential implications if pay-as-you-drive (PAYD) automobile insurance will be adopted in the U.S. It cites the national benefits of PAYD which include individual automobile insurance cost savings, reduced congestion, and reduced carbon dioxide emissions. On average, low-income families are expected to especially benefit from PAYD. It asserts that unless PAYD is mandated for all drivers, high-mileage drivers would not initially sign up as they would lose money by doing so.

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The article discusses the purpose of the "Is Biopower Carbon Neutral?" report of the U.S. Congressional Research Service on the generation of electricity from biomass fuel such as paper mill residues. Topics included are the claims as to the greenhouse gas emissions neutrality of biomass feedstock, differences in the baseline assumptions of stakeholders on combustion and gasification process net carbon emissions, and the comparison of biopower with other renewable energy sources.