Near term carbon tax policy in the us economy: Limits to deep decarbonization

Abstract

This paper explores carbon dioxide (CO2) tax policies from 2015 to 2030 in the United States economy using an energy system least-cost optimization model. We report limited near-term decarbonization opportunities outside of the electricity sector, which results in substantial CO2 tax revenue through 2030. Second, because the social cost of carbon is uncertain, we find asymmetric deadweight loss from implementing mistakenly high or low CO2 taxes, providing efficiency-based support for the precautionary principle. Third, despite CO2 reductions occurring mainly in the electric sector, the abatement estimated herein is consistent with the US nationally determined contributions established under the Paris Agreement.