The economics of carbon taxes
Cosponsored with the Brookings Institution, International Monetary Fund, and Resources for the Future
Video
About This Event

Event Summary

With the growing need for reform in the US fiscal system, the idea of a tax on carbon has emerged as a possible solution. On Tuesday at AEI, four panels explored the merits and challenges of implementing a tax on carbon, discussing topics ranging from its distributional effects to its potential impact on international trade.

Roberton Williams of Resources for the Future began by highlighting three advantages that a carbon tax has over outright regulation, while AEI's Aparna Mathur explained the economic reasoning behind a theoretical tax on carbon to correct for externalities of pollution. Panelists also discussed how carbon taxes would function in an international framework and their potential macroeconomic effects.

Karen Palmer of Resources for the Future emphasized the difficulties posed by the complex structure of American government for a carbon tax. Donald Marron of the Urban Institute argued that carbon tax revenues could be used to lower corporate tax rates to increase economic efficiency in the US. Panelists overwhelmingly agreed that more research on the effects of a carbon tax is needed, but that it raises important questions for academics and policymakers alike.
-- Emma Bennett

Event Materials

Williams panel 3 presentation
Williams panel 1 presentation
Mathur AEI Presentation
Calder Presentation
Parry Presentation
Marron Presentation
Morgenstern Presentation
Fawcett Presentation
Gale Presentation
Aldy Presentation
Dinan Presentation

Event Description

The pros and cons of introducing a carbon tax in the US are the topic of many spirited debates, yet discussion of the consequences from alternative tax designs remains largely confined to academia.

In an effort to shed more light on this topic and its budgetary impact, AEI, the Climate and Energy Economics Project at the Brookings Institution, the International Monetary Fund, and Resources for the Future are cohosting a conference to discuss ideas for US carbon tax design and options for the potential use of carbon tax revenues. The conference will feature four panels with presentations of policy briefs by leading experts, each of which will tackle a particular design or implementation issue. Speakers will take audience questions following their remarks.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Agenda

8:45 AM
Registration and Breakfast

9:00 AM
Welcome
Aparna Mathur, AEI

9:10 AM
Panel I: Carbon taxes in context
Panelists:
Allen Fawcett, Energy Modeling Forum 24 Working Group
William Gale, Brookings Institution and Urban-Brookings Tax Policy Center
Roberton Williams, Resources for the Future and University of Maryland
Moderator:
Molly Macauley, Resources for the Future

10:30 AM
Break

10:40 AM
Panel II: Practical tax issues and implications for other energy and technology policies
Panelists:
Jack Calder, International Monetary Fund
Karen Palmer, Resources for the Future
Ian Parry, International Monetary Fund
Moderator:
Ruud de Mooij, International Monetary Fund

12:30 PM
Lunch and Keynote Address
Introduction: Adele Morris, Brookings Institution
Speaker: Gilbert Metcalf, US Department of the Treasury

1:30 PM
Panel III: Domestic impacts and international implications
Panelists:
Joe Aldy, Harvard University
Aparna Mathur, AEI
Roberton Williams, Resources for the Future and University of Maryland
Moderator:
Ted Gayer, Brookings Institution

2:50 PM
Break

3:00 PM
Panel IV: Compensation and use of revenues
Panelists:
Terry Dinan, Congressional Budget Office
Donald Marron, Urban Institute and Urban-Brookings Tax Policy Center
Richard Morgenstern, Resources for the Future
Moderator:
Jeffrey Eisenach, AEI

4:30 PM
Concluding Remarks
Aparna Mathur, AEI

4:45 PM
Reception

Event Contact Information

For more information, please contact Veronika Polakova at [email protected], 202.862.4880.

Media Contact Information

For media inquiries, please contact Véronique Rodman at [email protected], 202.862.4871.

Speaker Biographies

Joe Aldy is an assistant professor of public policy at the Harvard Kennedy School of Government, a nonresident fellow at Resources for the Future, and a faculty research fellow at the National Bureau of Economic Research. His research focuses on climate change policy, energy policy, and mortality risk valuation. In 2009–10, he served as the special assistant to the president for energy and environment, reporting through both the National Economic Council and the Office of Energy and Climate Change Policy at the White House. Aldy was a fellow at Resources for the Future from 2005–08 and served on the staff of the President's Council of Economic Advisers from 1997–2000. He also served as the co-director of the Harvard Project on International Climate Agreements, co-director of the International Energy Workshop, and treasurer for the Association of Environmental and Resource Economists before joining the Barack Obama administration.\

Jack Calder is a technical adviser in the International Monetary Fund’s (IMF) Fiscal Affairs Department. He specializes in natural resource revenue administration and has advised 10 governments during his work at the IMF and in earlier periods working as a freelance consultant. Calder previously worked in the United Kingdom Inland Revenue for 27 years, where his senior management roles included deputy director of operations responsible for compliance operational policy and deputy director of the Oil Taxation Office.

Terry Dinan is a senior adviser at the Congressional Budget Office (CBO). While at CBO, she has written about a variety of environmental and energy issues, including numerous studies on the design of climate policies and their implications for households and businesses in the US, the costs and consequences of higher Corporate Average Fuel Economy standards, and the costs and effects of policies aimed at subsidizing energy sources and technologies. Dinan’s position entails communicating technical research to lawmakers, congressional staff, industry groups, environmental groups, academics, and foreign policy officials, among others. She has been published in a variety of professional journals and served as an associate editor for the Journal of Environmental Economics and Management. Before coming to CBO, Dinan worked at the Environmental Protection Agency. 

Jeffrey Eisenach has served in senior positions at the Federal Trade Commission and the Office of Management and Budget. As a visiting scholar at AEI, he focuses on policies affecting the information technology sector, innovation, and entrepreneurship. Eisenach is also a managing director and a principal at Navigant Economics and an adjunct professor at the George Mason University School of Law, where he teaches Regulated Industries. He has written on a wide range of issues including industrial organization, communications policy and the Internet, government regulations, labor economics, and public finance. Eisenach has also taught at Harvard University's Kennedy School of Government and at the Virginia Polytechnic Institute.

Allen Fawcett is the acting chief of the Environmental Protection Agency’s (EPA) Climate Economics Branch, which is responsible for developing and applying EPA’s economic models for domestic and international climate change policy analyses. He previously served as the deputy associate director for energy and climate at the White House Council on Environmental Quality, where he worked on a wide range of energy and climate issues, such as the President’s Clean Energy Standard proposal from the 2010 State of the Union Address.  At the EPA, Fawcett led the agency’s economic analyses of the leading climate change legislative proposals in the US Congress using a suite of models including the applied dynamic analysis of the global economy model and the intertemporal general equilibrium model. Fawcett is co-chair of the Stanford University Energy Modeling Forum (EMF) 24 US exercise, which is exploring the market-based and regulatory approaches to US greenhouse gas reductions under different technology futures.  He also played a leading role in the EMF 22 US Transition Scenarios Subgroup.  He joined the EPA in 2003.

William Gale is the Arjay and Frances Miller Chair in Federal Economic Policy in the Economic Studies Program at the Brookings Institution. His research focuses on tax policy, fiscal policy, pensions, and saving behavior. He is co-director of the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. Gale is also director of the Retirement Security Project. From 2006 to 2009, he served as vice president of Brookings and director of the Economic Studies Program. Before joining Brookings in 1992, he was an assistant professor in the department of economics at the University of California, Los Angeles, and a senior economist for the Council of Economic Advisers under President George H.W. Bush. Gale is the co-editor of several books, and his research has been published in several scholarly journals, including the American Economic Review, the Journal of Political Economy, and the Quarterly Journal of Economics. In 2007, a paper he co-authored was awarded the TIAA-CREF Paul A. Samuelson Award Certificate of Excellence. 

Ted Gayer is the co-director of the Economic Studies Program and the Joseph A. Pechman Senior Fellow at the Brookings Institution. He conducts research on a variety of economic issues, focusing on public finance, environmental and energy economics, housing, and regulatory policy. Before joining Brookings in 2009, he was associate professor of public policy at Georgetown University. From 2007 to 2008, Gayer was deputy assistant secretary for economic policy at the US Department of the Treasury. While at the Treasury, he worked primarily on housing and credit market policies, as well as energy and environmental issues, health care, Social Security, and Medicare. From 2003 to 2004, Gayer was a senior economist on the president’s Council of Economic Advisers, where he worked on environmental and energy policies. From 2006 to 2007, he was a visiting fellow at the Public Policy Institute of California, and, from 2004 to 2006, was a visiting scholar at AEI.

Molly Macauley is vice president for research and senior fellow at Resources for the Future. Her research includes the economics of new technologies for research, understanding the interactions between people and natural resources, and the use of economic incentives in environmental regulation. She serves on several special committees of the National Academy of Sciences and federal agencies. Macauley also serves on the National Academy’s Space Science Board, the board of trustees of the University Corporation for Atmospheric Research, the board of advisers for the Thomas Jefferson Program in Public Policy at the College of William and Mary, and the Women in Aerospace Scholarship Committee. She has also been elected to membership in the International Academy of Astronautics and the International Women’s Forum of DC, and was selected as a “rising star” by the National Space Society. Macauley has testified extensively before Congress and is the author of more than 80 articles, reports, and books.

Donald Marron is an expert on US economic policy and federal budgeting. Since joining the Urban Institute as director of the Urban-Brookings Tax Policy Center, his research has focused particularly on tax reform and America’s long-run fiscal challenges. From 2002 through early 2009, he served in a series of senior government positions, including as a member of the president's Council of Economic Advisers, acting director of the Congressional Budget Office, and executive director of Congress's Joint Economic Committee. He has also taught at the Georgetown Public Policy Institute and the University of Chicago Graduate School of Business, consulted on major antitrust cases, and served as chief financial officer of a health care software start-up. A popular public speaker, Marron appears frequently at conferences and on television and radio to discuss economic policy. He also works to popularize economics through his blog (www.dmarron.com) and writings for CNN Money and the Christian Science Monitor. He is the editor of “30-Second Economics,” a short book that introduces readers to 50 of the most important theories in economics. Marron is also an adviser to several start-up companies. 

Aparna Mathur is an economist whose writing focuses on taxes and wages. She has been a consultant to the World Bank and has taught economics at the University of Maryland. Her work ranges from research on carbon taxes and the impact of state health insurance mandates on small firms to labor market outcomes. Mathur’s research on corporate taxation includes the widely discussed and co-authored 2006 "Wages and Taxes" paper, which explored the link between corporate taxes and manufacturing wages.

Gilbert Metcalf serves as the deputy assistant secretary for environment and energy in the US Department of the Treasury. He leads the Office of Environment and Energy, which develops, coordinates, and executes the Treasury’s role in the domestic and international environment and energy agenda of the US. Before coming to the Treasury, Metcalf taught at Tufts University (1994–2011), where he is a professor of economics currently on leave. While at Tufts, he served on a National Academy of Sciences panel measuring the full social costs of energy production and consumption and served as chair of the department of economics from 2002 to 2005. Metcalf has likewise taught at Princeton University, Harvard Kennedy School of Government, and the Massachusetts Institute of Technology (MIT). An internationally recognized scholar in the area of environmental and energy economics, Metcalf has published over 100 papers in academic journals and other outlets and has edited three books. Metcalf has served on a number of other national or international committees and testified before Congress several times on environmental and tax issues. He is a research associate (on leave) at the National Bureau of Economic Research as well as at MIT's Joint Program on the Science and Policy of Global Change. Metcalf has also served as the vice president for academic affairs for the United States Association for Energy Economics. 

Ruud de Mooij is deputy division chief for the Tax Policy Division of the International Monetary Fund’s (IMF) Fiscal Affairs Department. Before joining the IMF, he was professor of public economics at Erasmus University Rotterdam and economist at CPB in the Netherlands. Ruud is currently also a research fellow at the University of Oxford, member of the CESifo network in Munich, and serves on the board of the International Institute of Public Finance. His main research interests are in public finance and environmental tax reform. He has published in the American Economic Review, the Journal of Public Economics and International Tax and Public Finance. He is currently the policy-watch editor for this latter journal.

Richard Morgenstern’s
research focuses on the economic analysis of environmental issues with an emphasis on the costs, benefits, evaluation, and design of environmental policies, especially economic incentive measures. His analysis also focuses on climate change, including the design of cost-effective policies to reduce emissions in the US and abroad.  Immediately before joining Resources for the Future, Morgenstern was senior economic counselor to the undersecretary for global affairs at the US Department of State, where he participated in negotiations for the Kyoto Protocol. Previously, Morgenstern served at the Environmental Protection Agency, where he acted as deputy administrator (1993); assistant administrator for policy, planning, and evaluation (1991–93); and director of the Office of Policy Analysis (1983–95). Formerly a tenured professor at the City University of New York, Morgenstern has recently taught at Oberlin College, the Wharton School of the University of Pennsylvania, Yeshiva University, and American University. He has served on expert committees of the National Academy of Sciences and as a consultant to various organizations.

Adele Morris is a fellow and policy director for climate and energy economics at the Brookings Institution. Her expertise and interests include the economics of policies related to climate change, energy, natural resources, and public finance.  She joined Brookings in July 2008 from the Joint Economic Committee (JEC) of the US Congress, where she spent a year as a senior economist covering energy and climate issues. Before the JEC, Morris served nine years with the US Department of the Treasury as its chief natural resource economist, working on climate, energy, agriculture, and radio spectrum issues. On assignment to the US Department of State in 2000, she was the lead US negotiator on land use and forestry issues in the international climate change treaty process. Before joining the Treasury, Morris served as the senior economist for environmental affairs at the president’s Council of Economic Advisers during the development of the Kyoto Protocol. She began her career at the Office of Management and Budget, where she conducted regulatory oversight of agriculture and natural resource agencies.

Karen Palmer is a senior fellow and research director at Resources for the Future (RFF) in Washington, DC, where she also serves as associate director for electricity in the Center for Climate and Electricity Policy. She specializes in the economics of environmental and public utility regulation, particularly on issues at the intersection of air quality and climate regulation and the electricity sector. She also studies the energy efficiency gap and cost-effective ways to promote energy efficiency. Palmer’s work has direct links to debates on the design of federal policies to reduce greenhouse gas emissions and regional efforts to control releases of carbon dioxide, including the Regional Greenhouse Gas Initiative in the Northeastern US and the implementation of Assembly Bill 32 legislation in California. She is a co-author of the book “Alternating Currents: Electricity Markets and Public Policy” (RFF Press, 2002). Before joining RFF in 1989, Palmer was a teaching fellow at Boston College and a staff economist at Data Resources Inc. From 1996–97, Palmer was a visiting economist in the Office of Economic Policy at the Federal Energy Regulatory Commission.  

Ian Parry is technical assistance adviser for climate change and environmental policy in the Fiscal Affairs Department of the International Monetary Fund. From 1995 to 2010, he was at Resources for the Future where he was the first appointee to the Allen V. Kneese Chair in environmental economics. Parry has developed analytical and empirical models to study many different issues in climate policy design. These include carbon tax shifts, the costs of carbon taxes versus emissions trading systems, the effectiveness and cost effectiveness of a wide range of market and regulatory options for reducing carbon dioxide, the distributional incidence of climate mitigation policy, and the implications of possible market failures associated with clean technology development and deployment for climate-policy design.  Parry recently co-authored two books, “Fiscal Policy to Mitigate Climate Change: A Guide for Policymakers and Issues of the Day,” “100 Commentaries on Environmental, Energy, Transportation, and Public Health Policy,” and the report “Toward a New National Energy Policy: Assessing the Options.” In 2011, he worked on the report “Mobilizing Climate Finance,” prepared by the World Bank, IMF, and others at the request of the G20 Finance Ministers. Parry has also published over 50 papers in professional journals and has written numerous other articles for books and magazines.

Roberton Williams is an associate professor at the University of Maryland, College Park, senior fellow and director of academic programs at Resources for the Future, and a research associate of the National Bureau of Economic Research. He studies both environmental policy and tax policy, with a particular focus on interactions between the two. Williams was previously an associate professor at the University of Texas at Austin, a visiting research scholar at the Stanford Institute for Economic Policy Research, and an Andrew W. Mellon Fellow at the Brookings Institution, and has served as a co-editor of the Journal of Public Economics and the Journal of Environmental Economics and Management.

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