Evaluating the Impact of Carbon Tax Implementation on the U.S. Economy

This essay examines the impact of implementing a carbon tax in the United States, focusing on its potential effects on the economy and environment. The carbon tax, a fee imposed on organizations burning fossil fuels, aims to reduce carbon emissions and mitigate climate change. While some argue that it could modestly impact the GDP, this Pigouvian tax addresses negative externalities like greenhouse gas emissions. The tax can incentivize companies to adopt clean energy, increase energy efficiency among consumers, and generate revenue for the government, which can be used to minimize federal deficits or fund additional programs. Implementing a carbon tax may lead to increased electricity and gasoline prices, but subsidies toward renewable energy sources and public transportation can offset these costs. The essay also references the US withdrawal from the Paris climate agreement and emphasizes the importance of pricing carbon pollution to balance economic growth with environmental responsibility. Desklib offers more resources on this topic.

Economics : 1
Impact of carbon tax on the United States
Carbon tax is a fee, which government charges on organisation that burn fossil fuels. Most
widely discussed criteria includes oil, natural gas, gasoline, and coal on which there is
imposition of carbon tax. Carbon related fuels lead to the emission of greenhouse gases.
Carbon tax aims to price carbon, which will reduce the amount of carbon emissions in
atmosphere and also mitigate its impact of climate changes. On the other hand, type of
revenue neutral carbon tax, which have modest impact on economy especially GDP (Gross
domestic product) (Dong et al., 2017). This tax is known as Pigouvian tax where market
transaction creates negative externality. Negative externality exacts direct costs, which were
not the part of first transaction regarding tax. The gases include methane, and Co2 that
creates global warming by heating atmosphere. The resultant of climate disruption can cause
extreme weather that includes heat waves, droughts, blizzards, and flooding (Dong et al.,
2017).
This tax has high influence on companies as it reduces the emissions in two ways. Foremost,
cost of carbon-based fuels can motivate the organisation to include clean energy kin its
operations. Carbon tax will include the increasing price of electricity and gasoline. Customers
will become energy efficient by reducing emission of greenhouse gases (Pereira, Pereira, &
Rodrigues, 2016).
The carbon tax is necessary for how it would affect the economy
As far as the impact on economy is concerned, carbon tax will increase the price of
electricity, and gasoline. Consumers will become more efficient and it will reduce greenhouse
gas emissions. The government will have to determine the external cost for every ton of
greenhouse gases. The economy will be benefited by the government subsidies towards coal,
gas, and oil organisation (Wang, Wang, & Huang, 2017). The economic impact of carbon tax

Economics: 2
depends on how the tax generation is useful to increase revenue. Rebates have made tax
codes significant more progressive, which lead to lower production and few full time jobs.
Tax cuts will make the tax code more progressive, improves employment, and boost output.
This tax can lead to price carbon emissions, where carbon tax can increase additional
revenue. This revenue can be used to minimise federal deficit, which helps to create the
additional programs. This tax will allow industries to identify effective method to minimise
carbon emissions. This is a better alternate free market economy rather than being trapped in
governmental regulations (Pereira, Pereira, & Rodrigues, 2016).
The overall cost of hydropower, solar, and subsidisation of wind will lower the cost and
attract alternatives. These subsidies will increase wind power nearly 8 percent of US electric
generation. It will promote public transportation where it will minimise the need for cars. It
has been reported that US economy will surely slowdown by 0.5 percent each year when they
stay on current climate path. This compares less than slowdown of US growth rate under
Carbon taxation. One has to implement carbon tax, which helps to meet Paris climate
agreements (targets), where economic impact is negligible. US decided to eradicate Paris
climate agreement because this agreement would hurt US economy and allocate unfair
advantage to other developing nations and they were not needed to eradicate greenhouse
gases (Böhringer, & Rutherford, 2017). Pricing carbon pollution is smart where emissions
have fallen as the economy is expected to grow (Kotchen, Turk, & Leiserowitz, 2017).

Economics: 2
References
Böhringer, C., & Rutherford, T. F. (2017). US withdrawal from the Paris Agreement:
Economic implications of carbon-tariff conflicts. The Harvard Project on Climate
Agreements.
Dong, H., Dai, H., Geng, Y., Fujita, T., Liu, Z., Xie, Y., & Tang, L. (2017). Exploring impact
of carbon tax on China’s CO2 reductions and provincial disparities. Renewable and
Sustainable Energy Reviews, 77, 596-603.
Kotchen, M. J., Turk, Z. M., & Leiserowitz, A. A. (2017). Public willingness to pay for a US
carbon tax and preferences for spending the revenue. Environmental Research
Letters, 12(9), 094012.
Pereira, A. M., Pereira, R. M., & Rodrigues, P. G. (2016). A new carbon tax in Portugal: A
missed opportunity to achieve the triple dividend?. Energy Policy, 93, 110-118.
Wang, C., Wang, W., & Huang, R. (2017). Supply chain enterprise operations and
government carbon tax decisions considering carbon emissions. Journal of Cleaner
Production, 152, 271-280.