The Brookings Institution. July 24, 2012.
This paper examines fiscal reform options in the United States with an intertemporal computable general equilibrium model of the world economy called G-Cubed. Six policy scenarios explore two overarching issues: (1) the effects of a carbon tax under alternative assumptions about the use of the resulting revenue, and (2) the effects of alternative measures that could be used to reduce the budget deficit. The authors find that the carbon tax will raise considerable revenue, and that it also significantly reduces U.S. CO2 emissions by an amount that is largely independent of the use of the revenue. [Note: contains copyrighted material].