Carbon Tax Review and Updating: Institutionalizing an Act-Learn-Act Approach to U.S. Climate Policy

2019, Paper, "The design of climate change policy faces the challenge of several key uncertainties. First, the potential benefits of reducing carbon dioxide (CO2) and other greenhouse gas (GHG) emissions are characterized by an array of uncertainties related to long-term economic growth, climate sensitivity, the effectiveness of emissions mitigation policy, and the climate risk mitigation actions undertaken through adaptation and geoengineering (Interagency Working Group on the Social Cost of Carbon 2010; Greenstone, Kopits, and Wolverton 2013; Aldy 2015; Taylor 2015). Second, the potential costs of reducing emissions are characterized by uncertainties about the relative costs of low-carbon and carbon-intensive energy sources, technological innovation, consumer responsiveness to energy price changes, as well as the cost-effectiveness of policy design (Aldy et al. 2010). Third, the distributional consequences of climate change and climate policy responses are also characterized by uncertainty (Burtraw, Sweeney, and Walls 2009; Metcalf 2009; Rausch et al 2011; Carleton et al. 2018). Finally, the competitiveness impacts of emissions mitigation policy are uncertain and may vary with the relative stringency of policies around the world, transportation costs, and the energy intensity of manufacturing (Ederington, Levinson, and Minier 2005; Aldyand Pizer 2015; Aldy2017b)."