06/10/2011 by James Handley Getting the politics to align for a
carbon tax requires the right blend of honey and vinegar. For
years, advocates’ and opponents’ attention alike has focused on
the vinegar – the tax part. Lately, though, we’ve noticed
growing interest about how to best spread the honey — the
potentially huge revenues a carbon tax would generate. Here’s a
primer on the options: what they are, how they would work, their
merits and drawbacks, and who’s pushing them hardest. Setting
the initial tax rate at $15/T CO2 and increasing it by that
amount each year (reflecting the maximum carbon tax rate and
ramp-up of Rep. Larson’s bill) we estimate that the Treasury
would take in approximately $80 billion in revenue in the first
year. (This calculation uses the Carbon Tax Center’s spreadsheet
model.) This amount would rise each year, though at slightly
less than a linear rate as carbon reductions kicked in, reaching
around $600 billion by the tenth year. The allure of carbon tax
revenue also offers a grow