A Carbon Price Will Reduce Emissions More than Computer Models Predict

from Noah Kaufman, World Resources Institute

How much would a carbon tax reduce U.S. emissions?

The U.S. Energy Information Administration (EIA) found that if the country had set a carbon tax of $25 per ton in 2015 and increased it by 5 percent each year, CO2 emissions would have fallen to 32 percent below 2005 levels by 2030. But new research shows that this may underestimate a carbon price’s true potential.

In our new WRI issue brief, Putting a Price on Carbon: Reducing Emissions, we outline the specific ways a carbon price (meaning either a carbon tax or cap-and-trade program) would encourage emissions reductions by changing the behavior of producers, consumers and investors throughout the economy. We compare these incentives to the corresponding forecasts in EIA’s model, and we find that the model is likely underestimating emissions reductions in important ways.

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