Tax Policy Issues in Designing a Carbon Tax
- (pp. 563-68)
Abstract
A carbon tax is a promising tool for discouraging the greenhouse gas emissions that cause climate change. In principle, a well-designed tax could reduce the risk of climate change, minimize the cost of emissions reductions, encourage innovation in low-carbon technologies, and raise new public revenue. But designing a real-world carbon tax poses significant challenges. We analyze those challenges from a public finance perspective, emphasizing three tax policy design issues: setting the tax rate, collecting the tax, and using the resulting revenue. The benefits of a carbon tax will depend on how policymakers address those issues.Citation
Marron, Donald B., and Eric J. Toder. 2014. "Tax Policy Issues in Designing a Carbon Tax." American Economic Review, 104 (5): 563-68. DOI: 10.1257/aer.104.5.563Additional Materials
JEL Classification
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q54 Climate; Natural Disasters; Global Warming
- Q58 Environmental Economics: Government Policy