To Negotiate a Carbon Tax: A Rough Map of Policy Interactions, Tradeoffs, and Risks

Sooner or later, the federal government will assign a price to carbon dioxide emissions via legislation. The contents of that legislation will reflect negotiated agreement – built on various political tradeoffs – over a host of policy issues, ranging from taxes to energy efficiency standards. These tradeoffs would implicate not only the scope and price assigned by the carbon pricing policy, but also the policies with which it would interact. This paper anticipates that price will take the form of a carbon tax and describes interactions between that tax and various existing and proposed policies relating to climate change, energy, and environmental protection. It proceeds in five parts: Part 1 highlights three key points of background; Part 2 summarizes the universe of policies that can be expected to interact with a carbon tax; Part 3 provides a rough typology of interactions among a carbon tax and other policies, labeling them Complementary, Concurrent, or Conflicting; Part 4 identifies several important potential tradeoffs; and Part 5, which is less descriptive and more prescriptive than the other four, highlights the risks of particular tradeoffs to the effectiveness of a climate change mitigation policy suite that includes a carbon tax. One thing this paper omits is a discussion of the quantities of GHG emissions that would likely be reduced by a carbon tax alongside or as a net result of combination with other policies – existing or otherwise. This would be a useful line of further research but is beyond this paper’s scope