Abstract
While the environmental benefits of carbon taxes are well documented, their employment impacts are not. We simulate an escalating $25/tCO2 tax on the U.S. electricity system and estimate the resulting employment effects using a computable general equilibrium model. Meta-modeling of the results reveals how carbon taxes influence costs, prices, fuel shares and jobs. Overall, we estimate that the carbon tax would increase U.S. employment – e.g., by 511,000 jobs in 2030. Regional heterogeneities are explained, in part, by the path dependency of electricity portfolios and by regional resource variations. The carbon tax would motivate significant CO2 emission reductions, as well as utility bill increases that could on average be offset by carbon tax dividends. The possibility of inter-regional wealth transfers is highlighted, underscoring the importance of revenue recycling and other policy features that promote inclusive benefits.
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