According to the Center for Climate and Electricity Policy at the nonpartisan Resources for the Future, a tax of $25 per ton of carbon-dioxide emitted — through the combustion of fossil fuels used in electricity production, commercial and residential heating and transportation — “would raise approximately $125 billion annually.” This $125 billion “could allow federal personal income tax reductions of about 15 percent or corporate income tax reductions of about 70 percent, if all carbon tax revenues were used to replace current tax revenues. Alternatively, the federal deficit could be reduced by approximately $1.25 trillion over 10 years” — roughly what we are trying to do through the foolish sequester. Such a tax would add about 21 cents per gallon of gasoline and about 1.2 cents per kilowatt-hour of electricity. It could be phased in gradually as the economy improves.
Experts believe that the mere signal of a carbon tax would get companies to become more energy efficient. And that’s the point. As part of any grand bargain — which will have to include spending cuts and tax increases — introducing a carbon tax into the mix makes all kinds of options easier and smarter.