Carbon Taxes

Forthcoming draft chapter that has been accepted for publication by Edward Elgar Publishing in the book, Global Climate Law, edited by Daniel Farber and Marjan Peeters, due to be published in 2016.

FSU College of Law, Public Law Research Paper No. 760

FSU College of Law, Law, Business & Economics Paper No. 15-20

13 Pages Posted: 23 Jul 2015

See all articles by Shi-Ling Hsu

Shi-Ling Hsu

Florida State University - College of Law

Date Written: May 18, 2015

Abstract

This draft book chapter describes carbon taxes and reviews the literature surrounding the efficacy and economic impacts of carbon taxation.

A carbon tax is a unitary tax on a fossil fuel or other carbon-containing substance that is levied on the basis of carbon content. While it remains politically unattractive in most of North America, it has taken root in a number of countries. It is impossible to prove the negative that those countries have escaped economic harm from carbon taxation, but the argument that carbon taxes cause economic ruin now seems implausible.

The advantages of a carbon tax over alternative climate policies fall roughly into three categories: economic efficiency, incentives for innovation, and ease of administration. The challenges facing carbon tax design include the regressiveness of a raw carbon tax with no revenue recycling, the political economy barriers to enactment, limits to its effectiveness, and possibilities that it might crowd out subsequent climate policies. One of the strengths of carbon taxes is also its downfall: the transparency of such a straightforward tax makes it extremely easy to visualize the costs. Ironically, other climate policies that are ultimately more costly make it more difficult to visualize the costs. However, these shortcomings of carbon taxation speak to the political challenges, not the normative question of whether it is an appropriate climate policy. Carbon taxation, while not a stand-alone solution, is a policy that is economically efficient, easily administrable, and one that induces innovation.

Keywords: climate change, carbon taxation

Suggested Citation

Hsu, Shi-Ling, Carbon Taxes (May 18, 2015). Forthcoming draft chapter that has been accepted for publication by Edward Elgar Publishing in the book, Global Climate Law, edited by Daniel Farber and Marjan Peeters, due to be published in 2016. , FSU College of Law, Public Law Research Paper No. 760 , FSU College of Law, Law, Business & Economics Paper No. 15-20, Available at SSRN: https://ssrn.com/abstract=2634605 or http://dx.doi.org/10.2139/ssrn.2634605

Shi-Ling Hsu (Contact Author)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

HOME PAGE: http://myweb.fsu.edu/shsu/

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