SIPA Report: Comparing a Clean Electricity Standard and a Carbon Tax

Policies that encourage cutting greenhouse gas (GHG) emissions are essential to rapidly decarbonizing an economy. However, no single climate policy is a comprehensive decarbonization strategy. Proposals have targeted greenhouse gases both directly through, for example, carbon taxes or cap-and-trade strategies, and indirectly through, for example, regulating vehicle fuel efficiency or renewable electricity mandates. Currently, two main policies are being considered in the United States as the foundation for the next decade of decarbonization: (1) an economy-wide price on carbon dioxide (CO2) and other greenhouse gas emissions and (2) a sector-by-sector approach that starts with a clean electricity standard (CES).

The purpose of this Center on Global Energy Policy at Columbia University SIPA report is to identify key similarities and differences between a carbon tax and a CES. The authors assess an example of a carbon tax and a CES in which electric power CO2 emission reductions are roughly equivalent. The intent is to derive directional insights from a comparison of results using energy system modeling to enable policy makers to better understand the advantages and drawbacks of each policy option.