Build Your Own Carbon Tax
One way for the federal government to raise new revenue and reduce greenhouse gas emissions would be by putting a price on carbon. A carbon tax could help reduce the effects of climate change by incentivizing a shift toward low-carbon energy and transportation, promoting the development of cleaner technology, and raising revenue that could be used in part to fund new climate investments.
Our new Build Your Own Carbon Tax model allows you to create your own carbon tax and see how it would affect both the federal budget and net carbon emissions.
The model simulates a broad tax on carbon emissions throughout the economy, allowing you to determine the starting price, the year of full phase-in, and the real growth rate. The model then gives rough estimates for how much revenue the tax would raise each year from 2023 through 2032, how much it would raise in total, and the effect the tax would have on 2032 emissions relative to current projections. The model also provides options for how the revenue raised by the carbon tax could be used.
The Build Your Own Carbon Tax model shows only the effects of the new carbon tax, and not the additional effects of new climate-related spending, which could magnify these effects. For example, our paper, “Can a Carbon Tax Fund Climate Investments?,” found that combining a $40 per ton carbon tax with $550 billion of new climate investments could generate $900 billion of funding between 2022 and 2030 and reduce carbon emissions by 30 percent in 2030.
Importantly, the Build Your Own Carbon Tax model is not a micro-simulation model and is intended to provide only rough estimates of various choices. The model is loosely based on the Congressional Budget Office’s (CBO) July 2021 baseline, along with data and methodology developed and explained in CBO’s working paper, “How Carbon Dioxide Emissions Would Respond to a Tax or an Allowance Price: An Update: Working Paper 2021-16.” The model is also still in beta-testing mode, so please contact us if you identify any errors or believe we should add additional features.
To design your own carbon tax proposal, download our model here. Tweet your results with the tag #BuildYourOwnCarbonTax.