A Tax-Based Approach to Slowing Global Climate Change
37 Pages Posted: 20 Aug 2008 Last revised: 12 May 2013
Date Written: July 15, 2008
Abstract
In this paper, we discuss the design of carbon dioxide (CO2) taxes at the domestic and international level and the choice of taxes versus a cap-and-trade system. A strong case can be made for taxes on uncertainty, fiscal, and distributional grounds, though this critically hinges on policy specifics and how revenues are used. The efficient near-term tax is at least $5-$20 per ton of CO2 and the tax should be imposed upstream with incentives for downstream sequestration and abatement of other greenhouse gases. At the international level, a key challenge is the possibility that emissions taxes might be undermined through offsetting changes in other energy policies.
Keywords: global climate change, CO2 tax, cap-and-trade, policy design
JEL Classification: Q54, Q58, H23
Suggested Citation: Suggested Citation
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