Putting a Price on Carbon: A Handbook for U.S. Policymakers

The document examines carbon pricing mechanisms, specifically carbon taxes and cap-and-trade programs, as a core strategy for reducing greenhouse gas emissions in the United States. It details design features such as scope, point of regulation, and cost-containment mechanisms, while analyzing various ways to utilize generated revenues—including tax cuts, deficit reduction, and dividends—to offset economic impacts and increase political viability. The authors argue that a well-designed carbon price can provide a 'double dividend' of environmental benefit and economic efficiency.

• Carbon pricing shifts the economic burden of climate change from society to the emitters, creating incentives to reduce greenhouse gas emissions by increasing the price of carbon-intensive goods.
• Carbon taxes and cap-and-trade programs differ primarily in their certainty: a carbon tax provides a stable price pathway, whereas a cap-and-trade program ensures a firm limit on the quantity of emissions.
• Revenues from carbon pricing can be used to promote economic growth by reducing 'distortionary' taxes on labor and capital, which otherwise discourage work and investment.
• A 'fee-and-dividend' approach, where revenues are returned as lump-sum payments to households, can address the regressive nature of carbon pricing by ensuring low-income households are not financially worse off.
• The scope of a carbon pricing program—including the gases and sectors covered—determines its effectiveness; a broader scope generally leads to greater emission reductions at a lower overall cost.
• Upstream regulation, applying the price where fuels first enter the economy, allows for broad coverage of energy-related CO2 emissions while regulating relatively few entities.
• Economic theory suggests that a well-designed carbon tax can achieve a 'double dividend,' providing both climate benefits and net economic benefits through the removal of existing economic distortions.
• While a carbon tax is regressive because lower-income households spend a higher proportion of their income on energy, this can be mitigated through targeted revenue recycling.
• Border tax adjustments can protect the international competitiveness of energy-intensive, trade-exposed industries by applying tariffs to imports from countries without equivalent carbon pricing.
• Complementary policies, such as vehicle standards and R&D investment, are necessary because a carbon price alone may not overcome market barriers in sectors like transportation or the electric grid.

APA

Kennedy, K., Obeiter, M., & Kaufman, N. (2015). Putting a Price on Carbon: A Handbook for U.S. Policymakers. World Resources Institute. https://wriorg.s3.amazonaws.com/s3fs-public/carbonpricing_april_2015.pdf

Chicago

Kennedy, Kevin, Michael Obeiter, and Noah Kaufman. Putting a Price on Carbon: A Handbook for U.S. Policymakers. World Resources Institute, 2015. https://wriorg.s3.amazonaws.com/s3fs-public/carbonpricing_april_2015.pdf.

Wikipedia

{{cite report |last1=Kennedy |first1=Kevin |last2=Obeiter |first2=Michael |last3=Kaufman |first3=Noah |title=Putting a Price on Carbon: A Handbook for U.S. Policymakers |publisher=World Resources Institute |date=April 2015 |url=https://wriorg.s3.amazonaws.com/s3fs-public/carbonpricing_april_2015.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kennedy2015putting, author = {Kennedy, Kevin and Obeiter, Michael and Kaufman, Noah}, title = {{Putting a Price on Carbon: A Handbook for U.S. Policymakers}}, institution = {World Resources Institute}, year = {2015}, month = apr, url = {https://wriorg.s3.amazonaws.com/s3fs-public/carbonpricing_april_2015.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }