Carbon Taxes: The Evolving Conventional Wisdom (Sheila Olmstead, LBJ School of Public Affairs, University of Texas)

“We already have lots of policies in place that make energy more expensive. … All are trying to get at the same goal. … Most of those policies are much more expensive per ton of emissions than a carbon tax.”

“Any policy that increases the cost of energy is regressive unless we design the policy to be not regressive. … Almost all of [the policy alternatives to a carbon tax] do not generate any revenue that you can use to make things better for poor people, to make the policy less regressive. In contrast a carbon tax does generate revenue to do exactly that. … Government can use those revenues to make people’s lives better. … There are many ways to do this.”

“You want to set the tax approximately equal to the amount of damage emissions cause. … There is a lot of good academic research happening outside of government [that presents] mounting evidence that the older numbers ($40-50/ton) were too low. … This [new] work … is very high quality and it [it appears that it] is not going to be hard to exceed those old estimates.”

Sheila Olmstead is a professor at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin (UT), a visiting fellow at Resources for the Future (RFF) in Washington, DC and a senior fellow at the Property and Environment Research Center in Bozeman, Montana. From 2016–2017, she served as the Senior Economist for Energy and the Environment at the President’s Council of Economic Advisers. She holds a Ph.D. in public policy from Harvard University (2002), a master’s in public affairs from The University of Texas at Austin (1996) and a B.A. from the University of Virginia (1992).