Over the ten-year projection period, the carbon tax ranges from $15 to $105/t-1 CO2-e. We only analyze one aspect of the proposed legislation (i.e., agricultural cost of production and trade), and do not include other emission sources such as manufacturing or transportation. We should note that we use a simulation model to evaluate a reasonable pathway as opposed to using historical data in an econometric model thus, there is inherent uncertainty about the actual evolution of agricultural markets including land-use, prices, and emissions. Adjustments in production quantities (i.e., crop area and livestock herd) allow us to assess the global effects of the carbon tax. An increase in the PPI from the carbon tax will affect crop and livestock producers. We adjust the cost of production of US agriculture, which we model through the different components of the Producer Price Index (PPI). 1 We can attribute the difference between the baseline and our scenarios in terms of commodity prices, land-use, trade patterns, and GHG emissions to the various levels of the carbon tax. To assess the impacts of the carbon tax on agricultural producers in the United States and on international commodity markets, we use the CARD Model-a well-established global agricultural outlook model-to evaluate a baseline without a carbon tax and a scenario that includes a carbon tax. Second, there is no carbon tax on non-fossil fuel emissions from agriculture such as from livestock and fertilizer application-an important exemption because agriculture contributes 9% of total US GHG emissions (EPA 2019). For example, diesel fuel purchased for farm machinery is not subject to the tax. First, fuels and its derivatives are not taxable if used on-farm for farming purposes. Beyond the lump-sum payments and border adjustments, there are two tax exemptions specifically for agriculture. The purpose of the border adjustment is to avoid carbon leakage by switching to carbon-intensive imports whose production is not subject to a carbon tax. Second, there is a carbon border fee adjustment mechanism to adjust the cost of imported fuels and carbon-intensive products covered under the legislation. The tax revenue is distributed back to eligible individuals (i.e., US citizens and lawful residents) in the form of a lump-sum payment. First, the EICD Act of 2019 is designed as a revenue-neutral carbon tax with the creation of a Carbon Dividend Trust Fund. There are two important provisions of the carbon tax proposal to increase its support among stakeholders. The tax ceases if greenhouse gas (GHG) emissions are at or below 10% of the 2016 GHG emissions. Adjusted for inflation, the tax increases $10 each year and is subject to adjustments given the under- or over-achievement of annual emission reduction targets. The act proposes a carbon tax of $15/ton of carbon dioxide equivalent (t-1 CO2-e) starting in calendar year 2019, and covers entities such as refineries, coal mines, and natural gas producers. In January 2019, the Energy Innovation and Carbon Dividend (EICD) Act of 2019 was introduced to the House of Representatives. Rising concerns about climate change have led to the introduction of carbon policies around the globe.
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