Revenue Neutral Carbon Tax

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There are two main types of carbon pricing: emissions trading systems (ETS) and carbon taxes.

  • ETS – sometimes referred to as a cap-and-trade system – caps the total level of greenhouse gas emissions and allows those industries with low emissions to sell their extra allowances to larger emitters. By creating supply and demand for emissions allowances, an ETS establishes a market price for greenhouse gas emissions. The cap helps ensure that the required emission reductions will take place to keep the emitters (in aggregate) within their pre-allocated carbon budget.
  • Carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or – more commonly – on the carbon content of fossil fuels. It is different from an ETS in that the emission reduction outcome of a carbon tax is not pre-defined but the carbon price is.
    World Bank – What Is Carbon Pricing?

What is a Revenue Neutral Carbon Tax?
The government provides a plan to the taxpayers and elected officials demonstrating how all of the carbon tax will be returned to taxpayers through tax reductions. The money will not be used to fund government programs
British Columbia – Ministry of Finance: What is a Carbon Tax

Tax Cuts Funded by the Revenue Neutral Carbon Tax
B.C.’s revenue-neutral carbon tax has allowed British Columbia to reduce taxes for individuals, families and business.
Every dollar generated by the revenue-neutral carbon tax is returned to British Columbian’s through tax reductions. For the 2012/13 fiscal year, the tax reductions are expected to return $260 million more to taxpayers than the amount of carbon tax paid. In addition to the low-income climate action tax credit, other measures to mitigate the carbon tax for families include the up-to-$200 Northern and Rural Homeowner benefit.

As a result, B.C. now has the lowest income tax rates in Canada for individuals earning up to $122,000. The general corporate income tax rate in B.C. is among the lowest in North America and the G7 nations, and since 2001, B.C.’s small business income tax rate has been reduced by 44 percent.
British Columbia – Ministry of Finance: Tax Cuts Funded by the Carbon Tax



  • Replace the Texas franchise tax with a revenue neutral carbon tax
  • Replace the Texas sales tax with a revenue neutral carbon tax
  • Replace an income tax with a revenue neutral carbon tax


  • Use the revenue neutral carbon tax to fund a state EITC


Government of Alberta (Canada) – Carbon Pricing

Government of Mexico – Mexico Supports Carbon Pricing Initiative

Exxon Mobil supports a revenue neutral carbon tax

NPR – Q&A: Why The Patron Saint Of “Reagonomics” Supports A Carbon Tax

World Bank – British Columbia’s carbon tax shift: An environmental and economic success

British Columbia – Low Income Climate Action Tax Credit

The Globe and Mail – The shocking truth about British Columbia’s carbon tax: It works

The Globe and Mail – Ottawa seeks to set national minimum on carbon pricing

The Globe and Mail – The Canadian provinces get it: Carbon pricing can be simple and efficient

The Globe and Mail – Christy Clark touts British Columbia as Canada’s leader in carbon pricing

Wall Street Journal – Why We Support a Revenue-Neutral Carbon Tax

Wall Street Journal – Long-Term Costs of Cutting Emissions Grow Hazy

Wall Street Journal – Carbon-Tax Debate Brings Together Unusual Allies

The Guardian – In charts: how a revenue neutral carbon tax creates jobs, grows the economy

Washington Post – These could be the first U.S. states to tax carbon — and give their residents a nice paycheck

Mercury News – Citizens’ Climate Lobby: Republicans’ call for a carbon tax is validated

Mercury News – McRae: Cap and trade auction doesn’t negate California’s economic growth

Washington Post – More and more conservative thinkers want to tax carbon. Will politicians and activists follow?

Washington Post – Washington considers nation’s first carbon emissions tax

Washington Post – A Reagan approach to climate change

Washington Post – Want to eliminate the payroll tax? Better find $12 trillion to replace it

Business Journal – 5 local Oregon governments call for carbon pricing

How British Columbia Enacted the Most Effective Carbon Tax in North America

The Guardian – Carbon tax v cap-and-trade: which is better?

Brookings – Pricing Carbon: A Carbon Tax or Cap-And-Trade?

Reuters – Chile becomes the first South American country to tax carbon

Reuters – South Africa could delay carbon tax implementation beyond 2016: Treasury

OECD – Carbon taxes and emissions trading are cheapest ways of reducing CO2, OECD says

Financial Times – Alberta doubles carbon tax on large emitters by 2017

NBER – Carbon Taxes vs. Cap and Trade: A Critical Review

NBER – The Possibilities For Global Poverty Reduction Using Revenues From Global Carbon Pricing

NBER – Designing A Carbon Tax to Reduce U.S. Greenhouse Gas Emissions

New York Times – A Republican Case for Climate Action

New York Times – Carbon Pricing Becomes a Cause for the World Bank and I.M.F.

New York Times – The Myriad Benefits of a Carbon Tax

New York Times – Does a Carbon Tax Work? Ask British Columbia

New York Times – Boulder, Co Approves ‘Carbon Tax’ in Effort to Reduce Gas Emissions

Truth Out – Report: A Carbon Tax That Would Create Jobs, Cut Emissions and Put Money in Your Pocket

AEI – A carbon tax can be designed to be pro-poor

AEI – Should we swap the corporate income tax for a carbon tax?

World Resources Institute – Taxing Carbon to Finance Tax Reform

World Resources Institute – Bottom Line on Carbon Taxes

World Resources Institute – 4 Corporate Carbon Pricing Do’s and Don’ts

World Resources Institute – Cap or Tax? Key Questions and Answers

World Resources Institute – Putting a Price on Carbon A Handbook for U.S. Policy Makers

World Resources Institute – Carbon Tax vs. Cap-and-Trade: What’s a Better Policy to Cut Emissions?

The Economist – British Columbia’s Carbon Tax: The Evidence Mounts

The Economist – Why Exxon Mobil would support a carbon tax

Bloomberg – Tax Me, Says Exxon Mobil, in Declaring Support for Climate Talks

Bloomberg – South African Carbon Tax Could Spur GDP Growth, Study Shows

FORBES – Carbon Tax Getting Serious Consideration As CBO Seeks To Address Regressiveness

Niskanen Center – A Carbon Tax’s Benefits, Even if You Don’t Believe in Climate Change

Niskanen Center – California’s climate policy crisis

CBPP – The Design and Implementation of Policies to Protect Low-Income Households under a Carbon Tax

Why the allocation of Carbon Tax revenue matters more than the cost

Seattle Times – Carbon-tax initiative divides environmentalists

Christian Science Monitor – Will Washington be the first US state to have a carbon tax?

National Post – The conservative case for a carbon tax

Daily Kos – New Study: Revenue-Neutral Carbon Tax Would BOOST the Economy While Slashing CO2 Emissions

Think Progress – Citing ‘Climate Crisis,’ Massachusetts Gov. Candidate Berwick Calls For Carbon Tax

Think Progress – Now Is The Time For A Carbon Tax, IMF Chief Says

Think Progress – Grover Norquist Bombshell: Pairing A Carbon Tax With Income-Tax Cut Wouldn’t Violate GOP No-Tax-Hike Pledge

Think Progress – Chile Is Poised To Pass South America’s First Carbon Tax

Think progress – This Fossil-Fuel Producing Province Just Announced A Giant Carbon Plan

British Columbia provides model for Massachusetts Carbon Pricing

Why Massachusetts Needs to Enact a Revenue Neutral Carbon Tax

A Revenue-Neutral Approach to Pricing Carbon in Massachusetts

Boston Globe – Study recommends state ‘carbon tax’ to fight climate change

Boston Globe – Making a fair deal on carbon

Boston Globe – An 86-year-old MIT professor finally sees his idea catch fire—without credit for his work

MIT – Moving the National Conversation on Revenue-Neutral Carbon Tax

MIT – The Little Engine That Could: Revenue Neutral Carbon Fee and Dividend

MIT – Carbon Tax Revenue and the Budget Deficit: A Win-Win-Win Solution?

U.S. News – Good Climate Policy Doesn’t Hurt the Poor

Truth Out – Report: A Carbon Tax That Would Create Jobs, Cut Emissions and Put Money in Your Pocket

Resources for the Future – A Look at Six State Proposals to Tax Carbon

Alberta budget outlines carbon tax plan, including rebates for low and middle-income earners

Brookings – Build a better future for coal workers and their communities

Bloomberg – Does Pricing Carbon Worsen Inequality? It Doesn’t Have To

World Bank -Dutch Company Royal DSM Prices Carbon to ‘Future Proof’ Its Business

Forbes – Why ExxonMobil Is Supporting a Carbon Tax Now

LA Times – Forget cap and trade’s detractors, California’s carbon-pricing works

PBS – Why this conservative economist supports a carbon tax in Washington

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