Addressing Climate Change Through a Low-Cost, High-Impact Carbon Tax

Abstract

This article considers design features of a low-cost, high-impact carbon tax in terms of emissions reductions, drawing on international implementation experience. Costs can be reduced by offsetting carbon taxes with reductions in other taxes, using carbon tax revenue to compensate stakeholders, and incremental implementation. Impacts can be augmented by investing revenue in emissions reduction activity and complementary tax incentives for low-emissions technologies. Jurisdictions that have implemented such carbon taxes have continued to experience strong economic growth. While revenue and distributionally neutral carbon taxes that do not increase the overall tax take or change the distribution of wealth have been effectively introduced in many jurisdictions, this has not been the only approach. The more fundamental conclusion is that carbon taxes are being designed to maximize political acceptability and minimize economic disruption in their implementation context. This evidence of convergence toward low-cost, high-impact carbon tax design elements is establishing a viable pathway for international cooperation on carbon pricing at levels adequate to address climate change. Conversely, recent French experience indicates that carbon tax increases not based on substantial revenue and distributional neutrality may not be viable.

The Political Viability of Carbon Pricing: Policy Design and Framing in British Columbia and California

“…Nevertheless, the literature expects that the political viability of carbon pricing will vary, depending on certain aspects of policy design and framing. Regardless of the form of carbon pricing, public acceptance is increased if the price is either kept very low, as in the Regional Greenhouse Gas Initiative (RGGI) in the northeastern United States, or starts low and is raised only gradually (Carl & Fedor, 2016, p. 54; Geroe, 2019, pp. 12–4; Rabe, 2010b, pp.…”

“…In the narrow version, consumers get the benefits on a roughly equal basis, such as through equal per‐capita tax rebates or per‐household electricity bill rebates. In a broader version, revenue is used for spending that benefits consumers and voters more indirectly, such as on renewable‐energy, energy‐efficiency, climate protection, or public health programs (Geroe, 2019, pp. 14–6; Rabe, 2010a, p. 152; Raymond, 2016, pp.…”

Cities and Climate Change

“…We should give immediate attention to how to fund the climate crisis. A mixture of public and private investment is urgent and using proceeds from a global carbon tax may provide much-needed funds [78].…”

The Design of Green Supply Chains under Carbon Policies: A Literature Review of Quantitative Models

“…However, authors like Hafezalkotob [43], Madani and Rasti-Barzoki [47], Hafezalkotob [60], and Zhou, Gong, Huang and Peters [81] mention that carbon tariffs can be administered as a tax by a country to the production system based in another country. Such a tax may help in the coordination of carbon pricing across the supply chain [83].…”

“…One possible approach to cope with the carbon leakage problem is to impose innovative carbon policies, like carbon tariffs on the goods from unregulated countries [81] or a global cap policy [17]. Another study [83] mentions that a policy of incrementally increasing carbon taxes may help in the coordination of carbon pricing across a SC (that may involve many nations) and it may support a holistic analysis of carbon policies for a GSC. A possibility of linking carbon policies across nations for a coordinated emissions reduction is also mentioned in Wang-Helmreich and Kreibich [10].…”