EPA Includes Carbon Tax in Final Power Plant Rule

Yesterday, the Environmental Protection Agency finalized a rule to reduce carbon pollution from existing power plants, under the Clean Air Act. The final rule has explicitly allowed a carbon tax as a means of complying with the Clean Power Plan (p. 899). If states do decide to adopt a carbon tax as their compliance mechanism, they will also need to put forward a back-up option in case their primary plan does not result in the promised emissions reductions. This requirement also applies to other measures, such as a renewable portfolio standard.

A carbon tax could match or even exceed the EPA's emission reduction targets as supported by data from the Energy Information Agency (pp. ES-5, MT-34). In order to accomplish this, the price must be meaningful and rise over time. Stanford University, Brookings Institution, Friends of the Earth, R Street Institute and others submitted joint comments to the EPA advocating for a carbon tax in the final Clean Power Plan.

Friends of the Earth Climate and Energy Campaigner Kate DeAngelis issued the following statement in response to the final rule:

There is broad support for a carbon tax across the political spectrum to help combat climate disruption. We are pleased that the EPA chose to allow a carbon tax in its final existing power plant rule. Analysis from economists as well as government data has shown that a carbon tax is an effective and efficient means of achieving greenhouse gas reductions. If a state chooses to implement a carbon tax, it will create momentum for a national carbon tax. A robust carbon tax is an important mechanism the U.S. should use to achieve the reductions necessary to avert the worst impacts of climate disruption.