As part of its most recent Annual Energy Outlook, the U.S. Energy Information Administration (EIA) conducted three alternative policy cases on how carbon fees affect emissions from fossil fuel consumption. In the short term, even relatively modest carbon fees reduce carbon dioxide (CO2) emissions, especially in the electric power sector where natural gas and renewables displace coal. However, once the emissions level associated with coal consumption in the power sector has been achieved, the remaining fossil fuel emissions from natural gas and petroleum consumption are harder to reduce.
