This issue brief discusses how a climate rebate implemented as a component of comprehensive carbon tax legislation can protect low- and moderate-income households from the loss in purchasing power they would otherwise experience from higher energy prices due to the carbon tax.
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Policies that restrict greenhouse-gas emissions are needed to encourage energy efficiency and greater use of clean energy sources. But because they will significantly raise the price of fossil-fuel energy products, these policies pose serious challenges for low- and moderate-income households.
We analyze the potential effects of climate change policies on those households and on the federal budget. We also design measures to ensure that the higher energy prices resulting from climate change legislation do not drive more households into poverty or make poor households even poorer.