The Congressional Budget Office says that a carbon tax would raise the most revenue out of the 35 different options suggested by the budget forecasting office.
The CBO estimates that a $25 per ton tax on carbon dioxide emissions would raise government revenues by $1.06 trillion over the next decade, while lowering U.S. carbon emissions by 10 percent as well.
A carbon tax is by far the biggest revenue raiser suggest by the CBO. The office suggested 35 different revenue options for cutting the federal budget deficit, including options like increasing income taxes and imposing a minimum tax. The second-highest revenue raising option listed by the CBO is eliminating deductions for state and local taxes, which would raise $954 billion over ten years.
According to the CBO, a carbon tax would be more efficient than having the Environmental Protection Agency impose clean air regulations to lower carbon emissions. The CBO also argues that there would be “co-benefits” from taxing carbon such as lowering other harmful pollutants and emissions as the power sector switches from using coal to natural gas or nuclear power.
Critics of the carbon tax have pointed out that it would be economically harmful, as it would raise the cost of virtually every good produced. Opponents also charge that a carbon tax will just allow politicians to recklessly spend more money.
“Washington politicians have run out of other people’s money, so they need a new source,” Daniel Kish, senior vice president of policy at the Institute for Energy Research. “Anybody who thinks that Washington isn’t coming after a carbon tax must live in a jurisdiction where pot is legal for recreational use.”
“All that does is hurt the poorest among us, it doesn’t hurt Al Gore, it doesn’t hurt the people at the CBO,” Kich added. “It hurts the people on the lowest rung of the economic scale that the president says he’s trying to help.”
The CBO’s carbon tax advocacy also comes as the Obama administration continues to implement its “social cost of carbon” (SCC) estimate. The SCC puts a monetary value on the economic damages caused by increased carbon dioxide emissions and must be used by federal regulatory agencies when calculating the costs and benefits of regulations.
The White House has repeatedly denied having plans to implement a carbon tax, but earlier this year the Obama administration quietly raised its SCC estimate from $21 per metric ton to $35 per metric ton — higher than the hypothetical $25 per ton carbon tax used by the CBO.
“It’s a proxy for a carbon tax,” Kish said. “They don’t want it to be the price the CBO uses, they want it to be a little higher, so they can say ‘it’s lower than the social cost of carbon.’”