The affirmative must specify the tax rate, the tax base, and how it will be trade law compliant

This Paper considers the design of a tax on greenhouse gases ("GHGs"). The purpose of such a tax, which we will generally refer to as a carbon tax, is to internalize externalities associated with anthropogenic climate change. n1 Without a carbon tax, individuals face a distorted set of prices. Activities that result in carbon emissions are relatively too cheap because individuals will not consider the costs the emissions impose on others, including on future generations. A tax forces individuals to consider the full set of consequences from emissions. The theory behind using taxes to internalize externalities dates back seventy years to writings by Pigou, but there is little experience with the design of these taxes and almost none with a "Pigouvian tax" that covers a substantial portion of the economy, as would a carbon tax. n2 There are several existing carbon taxes, but all are comparatively narrow or are otherwise badly designed. n3 There have also been several proposed carbon taxes introduced [*501] into legislation in the United States, but only in skeletal form. n4 Although one can learn from these examples, they do not serve as adequate models for the best possible design of a carbon tax. We consider three central design issues: the tax rate (including distributional issues, the use of the revenues, and tax rate changes); the tax base (including possible offsets or credits); and international trade concerns. Although the theory behind setting the rate is well known -- it should equal the marginal harm from emissions -- there are a number of difficult design considerations. n5 The most significant challenge is the design of a system for ensuring that the rate changes over time as new information becomes available about the costs and benefits of reducing emissions. The central problems in addressing climate change include uncertainty about its effects and uncertainty about the costs of abatement. The best available option is to utilize a crude estimate of the optimal rate and adjust the rate as new information arises. We suggest a delegation or partial delegation of rate-setting authority to an expert agency, which will ensure that the tax rate is reexamined at appropriate intervals and will provide expertise in the relevant parameters for setting the rate. Given the size of the tax and the potential winners and losers from rate changes, full delegation may not be possible, in which case we recommend a number of intermediate regimes. We also discuss the use of the revenues, recommending a revenue neutral and distributionally neutral adjustment to the income or payroll taxes.