Increasing Emissions Certainty under a Carbon Tax

arious organizations and individuals, including issue-oriented advocacy groups, research institutes, business groups, and members of Congress, have recently proposed that the United States consider use of a carbon tax as the primary federal policy to reduce greenhouse gas emissions.1 A carbon tax establishes a fixed fee per unit of emissions and thereby provides a certain price incentive to cut emissions.2 However, one concern regarding a carbon tax is that it does not ensure that the nation will achieve a specific emissions goal because the economy’s response to such a tax is unknowable in advance.3 This concern mirrors the reciprocal apprehension over allowance-price uncertainty (and ultimately cost uncertainty) under a cap-and-trade