The Fiscal Implications of the US Transition Away from Fossil Fuels

Daniel Raimi, Emily Grubert, Jake Higdon, Gilbert Metcalf, Sophie Pesek and Devyani Singh

Review of Environmental Economics and Policy, 2023, vol. 17, issue 2, 295 - 315

Abstract: The need to reduce greenhouse gas emissions requires curtailing coal, oil, and natural gas production and consumption. However, these fuels are major revenue sources for governments. Here, we develop a novel estimate of the revenues generated by fossil fuels for all governments in the United States. Then we estimate how those revenues change under three stylized scenarios through 2050. The first is business as usual (BAU), without further controlling emissions. The second is to limit the increase in global average temperature to 2°C. The third and most ambitious climate goal is to limit the increase to 1.5°C. We estimate that fossil fuels generate $138 billion annually for US governments. Although revenues decline under all three scenarios, they fall more quickly under the ambitious climate policy. Taxes on refined petroleum products are the largest source of revenue and decline under all scenarios. Oil and gas production is the second largest and is relatively stable under the BAU and 2°C scenarios but declines rapidly under the 1.5°C scenario. Under all scenarios, coal revenues decline rapidly, approaching zero by 2040 under the 1.5°C and 2°C scenarios. These revenue shortfalls will be concentrated in certain regions. At the same time, recent estimates of climate damages easily exceed the revenue losses described in this analysis. This highlights the need for policy makers to adopt emissions-reduction strategies and also address revenue shortfalls. The policy tools to accomplish both goals are relatively straightforward. However, implementing them will require overcoming considerable political challenges.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1086/725250 (application/pdf)
http://dx.doi.org/10.1086/725250 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: The Fiscal Implications of the US Transition Away from Fossil Fuels (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:renvpo:doi:10.1086/725250

Access Statistics for this article

More articles in Review of Environmental Economics and Policy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().