The Social and Economic Impacts of a Washington State Carbon Tax

Abstract

Carbon taxation is becoming a prominent tool to help reduce the greenhouse gas emissions that promote climate change. Using an Input-Output model of Washington State for 2013, I determine the relative carbon intensity of economic sectors and show how a carbon tax in Washington State will impact household consumption, trade, and industrial activity through price increases resulting from that carbon tax. Although many studies have shown that carbon taxes are regressive, Washington State is uniquely positioned to implement a carbon tax that is only mildly regressive due to the reliance on hydro and other renewable sources of electricity as opposed to fossil fuel generated electricity. These remaining regressive effects can be mitigated through revenue recycling of carbon tax receipts.