Taxing Carbon: What, Why, and How

The case for a carbon tax is strong. A well-designed tax could efficiently reduce the emissions that cause climate change and encourage innovation in cleaner technologies. The resulting revenue could finance tax reductions, spending priorities, or deficit reduction — policies that could offset the tax’s distributional and economic burdens, improve the environment, or otherwise improve Americans’ well-being. But moving a carbon tax from the whiteboard to reality is challenging. To help policymakers, analysts, and the public address those challenges, this report examines the what, why, and how of implementing a carbon tax and using the revenue it would generate.