A classification framework for carbon tax revenue use

Abstract

Carbon pricing could assist in the dual pursuit of mitigating global climate change and contributing to government coffers. The way in which a government allocates carbon tax revenues is a key factor in the public's acceptance of carbon pricing policy and ultimately in its enduring success. To that end, this article presents an innovative, simple classification framework of carbon tax revenue usage which has four modalities to cater for various policy design features. These are: a constrained approach as opposed to an unconstrained one; a revenue-neutral recycling approach as opposed to a revenue-raising one; an approach according to public preference; and a thematic approach. Thereafter, various attributes are examined to assist policymakers in selecting an appropriate modality. The classification framework will be useful for policymakers as a quick point of reference before embarking on more complex and in-depth policy deliberations. Key policy insights:. Carbon pricing is the most cost-effective regulatory approach for reducing greenhouse gas emissions and is recognized as a significant contributor to government revenue. . Carbon tax revenue use can be classified into four overarching modalities to cater for various policy design attributes. . There is no dominating revenue use option from an economic or political viewpoint, owing to trade-offs across various fiscal policy objectives. . Carbon taxes are elements of broader tax reform and therefore revenue use options should be aligned with a jurisdiction's broader fiscal policy charter.

Does a Recycling Carbon Tax with Technological Progress in Clean Electricity Drive the Green Economy?

“…Generally speaking, recycling carbon taxes reduces the tax burden and the negative impact on the economy, and different carbon tax recovery schemes will have different results [32]. The ultimate acceptance and successful implementation of a carbon tax depend on how the carbon tax revenue is utilized [33]. Most scholars study whether the carbon tax's double dividend will be realized.…”

Tantangan dan Strategi dalam Proses Implementasi Kebijakan Pajak Karbon

“…Munculnya penolakan publik terhadap pajak karbon di Indonesia juga dapat disebabkan karena kurangnya kepercayaan masyarakat terhadap kemampuan pemerintah dalam mengelola pendapatan dari pajak karbon. Steenkamp (2021) menyatakan bahwa cara pemerintah mengelola pendapatan pajak karbon merupakan faktor penting yang dapat mempengaruhi penerimaan publik terhadap kebijakan pajak karbon. Carattini et al (2017) juga menyatakan bahwa kurangnya kepercayaan masyarakat dapat membuat penerapan pajak karbon menjadi tidak efektif dalam meningkatkan kualitas lingkungan dan membuat keinginan masyarakat untuk menerima penerapan pajak karbon menjadi berkurang.…”

“…Strategi ini sejalan dengan pernyataan Ojha et al (2020) yang menyatakan bahwa pendapatan pajak karbon dapat dikelola oleh pemerintah dengan berinvestsasi secara eksklusif pada sektor energi terbarukan serta pada penelitian dan pengembangan untuk meningkatkan efisiensi energi. Selain itu, Steenkamp (2021) juga menyatakan hal serupa, yaitu pendapatan yang berhubungan dengan lingkungan dapat dialokasikan untuk proyekproyek yang mengurangi emisi CO2 atau membiayai sumber energi rendah karbon, misalnya, pendanaan penelitian dan pengembangan energi terbarukan serta pendanaan inovasi teknologi dan efisiensi energi.…”

Carbon pricing ethics

“…The most philosophically rich one has to do with evaluating options for recycling revenue, either from cap and trade auctions or from carbon taxes. One revenue recycling classification by Steenkamp (2021) asks whether the uses for revenue (i) are directed to specific projects or used for general purposes; (ii) return all of the revenue; (iii) match public preferences (such as redistribution or environmental benefits) (cf. Beiser‐McGrath & Bernauer, 2019); or (iv) balance different “thematic” desiderata.…”

“…4 4 Steenkamp (2021) calls the distinction between policies which return all of the revenue to the public versus spending less than is raised “revenue‐neutral” versus “revenue‐raising”; Mintz‐Woo et al. (2021) call it “revenue‐neutral” versus “revenue‐positive.” …”