In Charts: How a Revenue Neutral Carbon Tax Cuts Emissions, Creates Jobs, Grows the Economy

A revenue-neutral carbon tax or fee is a proposed policy to address global warming that's become increasingly popular, particularly in the US.  It's a simple concept – put a much needed price on carbon pollution, but return all the revenue that's generated to taxpayers (for example with a monthly refund) to offset rising energy costs.  This approach appeals to political conservatives, because it's a free market solution that doesn't increase the size of government.

A new study from Regional Economic Models, Inc. (REMI) models this type of policy. REMI has been developing regional forecasting and policy analysis models since 1980. In their study (full report here, summary here), REMI modeled the regional and national economic impacts of a revenue-neutral carbon tax starting at a modest $10 per metric ton of carbon dioxide in 2016, growing steadily by $10 per year each year.  They broke the US into nine distinct geographic regions.  A key finding in the study is that personal disposable income would increase under a revenue-neutral carbon tax in every region except for a slight decrease in the fossil fuel-heavy west south central states of Texas, Louisiana, Oklahoma, and Arkansas. 

This is in large part due to the fact that for most people, their monthly refunds would be larger than the increase in their energy costs.  REMI report lead author Scott Nystrom explained the reason for this rise in disposable income,

“Personal income per capita goes up because households receive the total benefit of the dividend as well as improved job opportunities and wages in the general economy, which more than counteracts any negative effects from higher energy and commodity prices.”

In Charts:  How a Revenue Neutral Carbon Tax Cuts Emissions, Creates Jobs, Grows the Economy