Carbon Tax with Reinvestment Trumps Cap-and-Trade

Abstract

There is a growing demand for domestic climate change legislation in the United States that will lead to significant reductions in greenhouse gas (GHG)1 emissions. A recent publication by the Intergovernmental Panel on Climate Change (IPCC) stated that fossil fuel consumption accounts for the majority of anthropogenic GHGs.2 If we fail to make significant reductions in GHG emissions, we are risking the future of our environment. Global climate change threatens to bring on catastrophic devastation to our entire planet’s resources.3 This threat has been a major push for climate change legislation in the United States.4 In order to reduce GHG emissions at the lowest possible cost, lawmakers need to adopt a climate change policy with economic incentives.5 To meet the challenge of reducing GHG emissions, innovation within the energy industry is necessary to promote development in cleaner production.6 The cost of such innovation plays a large role in managing this issue.