Impacts of Energy and Carbon Taxes on the US Pulp and Paper Industry

Market-based climate change policy instruments, such as energy and carbon taxes, have frequently been proposed as efficient means to stimulate industrial energy efficiency improvements and to reduce carbon emissions. This paper presents an assessment of the impacts that energy and carbon taxes may have on energy use and emissions profiles of the US pulp and paper industry. Time series data and engineering information are combined to endgenously specify changes in technologies and fuel mix within a dynamic computer model. The results of the model indicate under a wide range of assumptions that revenue-neutral energy or carbon taxes will increase carbon emissions when compared to the absence of those taxes, and that carbon emissions are higher under carbon taxes than under comparable energy taxes. Those seemingly counter-intuitive results have significant policy implications which are discussed in this paper.