Carbon Fee Fail-Safe and Safeguard

Abstract

The fail-safe makes sure the fee is high enough to meet carbon emission reduction targets. The safeguard keeps the fee from getting any higher than needed. One of the ways that we could account for the unpredictability of the price elasticity of demand for carbon would be to provide a fail-safe mechanism to ensure that we definitely stay on the carbon reduction schedule. If we keep Energy Innovation Act (HR 763) essentially as it is and scale up the annual carbon fee increase by Number-of-Years-Behind-Schedule * 0.15.

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