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Using Carbon Tax to Reach the U.S.’s 2050 NDCs Goals—A CGE Model of Firms, Government, and Households

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  • Kejia Yan

    (China Institute for Studies in Energy Policy, School of Management, Xiamen University, Xiamen 361005, China)

  • Rakesh Gupta

    (Department of Accounting, Finance and Economics, Griffith University, Nathan 4111, Australia)

  • Suneel Maheshwari

    (Department of Accounting and IS, Eberly College of Business, Indiana University of Pennsylvania, Indiana, PA 15705, USA)

Abstract

Our study shows how the United States government can achieve its goal of Nationally Determined Contribution (NDC) in 2025, 2030, and 2050 by reducing energy consumption through a pure carbon tax. To achieve its emissions reduction goals, it is necessary for the U.S. to impose a long-term carbon tax that balances taxes on labour, capital, energy, and carbon. Therefore, in this study, through the two-layer CGE Cobb–Douglas model, the carbon tax rate is set while balancing the production and profit functions of government, businesses, and households. This study concludes that the carbon price will increase from USD 0.4391/kg CO 2 in 2020 to USD 2.5671/kg CO 2 in 2050, when the CO 2 emissions reduction target is increased from 17% reduction in 2020 to 83% reduction in 2050 for the U.S.

Suggested Citation

  • Kejia Yan & Rakesh Gupta & Suneel Maheshwari, 2023. "Using Carbon Tax to Reach the U.S.’s 2050 NDCs Goals—A CGE Model of Firms, Government, and Households," JRFM, MDPI, vol. 16(7), pages 1-30, June.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:7:p:317-:d:1184202
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    Keywords

    CO 2 ; emissions; carbon tax;
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