With climate change legislation becoming a top congressional priority in recent months, a new study shows that a cap-and-trade system curbing greenhouse gas emissions would place an annual burden of $144.8 billion on American households. The average annual household burden would be $1,218, which would be approximately 2% of the average household income.
In Tax Foundation Working Paper No. 6, “Who Pays for Climate Policy? New Estimates of the Household Burden and Economic Impact of a U.S. Cap-and-Trade System,” Tax Foundation Adjunct Scholar Andrew Chamberlain explains that this burden would be disproportionately borne by low-income households, those under age 25 and over 75 years, those in southern states, and single parents with dependent children. The bottom 20 percent of income earners has an annual cap-and-trade burden that is equal to 6.2% of their household cash income. The second quintile has a burden equal to 3.2% of household cash income, the third quintile 2.4%, the fourth quintile 2.0% and the top quintile 1.4%.