Reject Carbon Taxes and Cap-and-Trade

Author: Preston Brashers, Research Fellow

Affordability 101 · Chapter 2: Abundant Energy and Natural Resources

Plymouth Institute for Free Enterprise

Topline

Lawmakers should reject all carbon taxes and cap-and-trade schemes.

Background

Policymakers have devised many schemes to tax carbon and other greenhouse gases (GHGs). They typically involve one of two approaches (or a hybrid):

1. Set and charge a price per unit of emissions; or
2. Set maximum quotas for the quantity of emissions, then have businesses purchase and/or trade the rights to emissions allowances (i.e., cap-and-trade programs).

Some schemes, like the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade system in the Northeastern U.S., are limited to certain utilities and energy generators. Others, like California’s and Washington’s systems, apply to more sectors, including transportation, mining, and manufacturing. Accurately measuring emissions throughout the economy would be highly data-intensive and prohibitively expensive. Broad carbon schemes may resort to crude estimation or face “leakage,” where production simply moves to where it’s less regulated and dirtier (e.g., China).

European Schemin’: All 27 members of the European Union (EU) take part in its Emissions Trading System (ETS), a cap-and-trade program that applies to power generation and heavy industry. In addition, most European countries apply carbon taxes (up to €146.23 per metric ton) that may apply to more sectors. As of 2026, the EU has begun imposing a carbon border adjustment mechanism (CBAM) that, when fully implemented, could apply to several hundred products entering European countries, based on the estimated lifecycle emissions associated with those products.

Action Items (Congress and States)

• States shouldn’t participate in carbon pricing schemes like the RGGI.
• Congress should reject calls for a carbon tax or cap-and-trade and should actively fight against attempts to impose a global carbon tax or CBAM.
• Congress should remove funding from global bodies that actively promote CBAMs or other global carbon tax regimes.

Putting a Price on Carbon Makes Life Less Affordable

• Carbon taxes and other schemes raise energy and production costs and reduce the affordability of fuel, electricity, buildings, vehicles, food, appliances, and more.
• In the 37 states that didn’t have cap-and-trade in 2024, average electricity prices were 11.2 cents per kWh, compared to 19.9 cents in cap-and-trade states.
• Europe’s electricity prices are more than double U.S. electricity prices, even though Europeans use about half as much electricity per capita as Americans.

Related Legislation: UNtaxed Act (S. 3276, H.R. 5888).

Bottomline

Carbon taxes and cap-and-trade programs are inherently flawed and arbitrary, as the net societal cost (or benefit) of a unit of CO2 is unknowable.

This memo is part of Affordability 101, Advancing American Freedom’s playbook of 101 policy solutions to make life more affordable.

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