Carbon tax

{{Further|Climate change|Climate change mitigation}}

{{Climate change mitigation}}

Carbon dioxide is one of several heat-trapping greenhouse gases (others include methane and water vapor) emitted as a result of human activities. The scientific consensus is that human-induced greenhouse gas emissions are the primary cause of climate change,{{cite web |url=http://www.ucsusa.org/assets/documents/ssi/climate-change-statement-from.pdf |title=Letter to U.S. Senators from 18 scientific organizations |first1=Alan I. |last1=Leshner |first2=Keith |last2=Sietter |first3=Douglas N. |last3=Arnold |display-authors=etal |date=21 October 2009 |archive-url=https://web.archive.org/web/20091103213447/http://www.ucsusa.org/assets/documents/ssi/climate-change-statement-from.pdf |archive-date=3 November 2009 }} and that carbon dioxide is the most important of the anthropogenic greenhouse gases.{{cite web |url=http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf |title=Climate Change 2007: Synthesis Report |page=14 |publisher=International Panel Climate Change |author=IPCC |year=2007 |access-date=3 March 2010 |archive-date=28 February 2011 |archive-url=https://web.archive.org/web/20110228135154/http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf |url-status=live }} Worldwide, 27 billion tonnes of carbon dioxide are produced by human activity annually.{{cite news |url=http://volcanoes.usgs.gov/hazards/gas/index.php |title=Volcanic Gases and Their Effects |archive-url=https://web.archive.org/web/20160130222415/http://volcanoes.usgs.gov/hazards/gas/index.php |archive-date=30 January 2016 |work=United States Geological Survey |access-date=10 August 2009 }} The physical effect of {{CO2}} in the atmosphere can be measured as a change in the Earth-atmosphere system's energy balance{{snd}}the radiative forcing of {{CO2}}.{{cite book|year=2007|author=Forster, P.|contribution=2.2 Concept of Radiative Forcing|url=http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2-2.html|title=Changes in Atmospheric Constituents and in Radiative Forcing|series=Climate Change 2007: The Physical Science Basis.|author2=Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change|editor=Solomon, S. D.|publisher=Print version: Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.. This version: IPCC website|access-date=25 August 2010|display-authors=etal|display-editors=etal|archive-url=https://web.archive.org/web/20101029222632/http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2-2.html|archive-date=29 October 2010|url-status=dead}} Different greenhouse gases have different physical properties: the global warming potential is an internationally accepted scale of equivalence for other greenhouse gases in units of tonnes of carbon dioxide equivalent.

Carbon taxes are designed to reduce greenhouse gas emissions by increasing prices of the fossil fuels that emit them when burned. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive.

{{See also|Economic analysis of climate change}}

A carbon tax is a form of pollution tax.{{cite encyclopedia|last=Groosman|first=Britt|title=2500 Pollution Tax|url=http://encyclo.findlaw.com/2500book.pdf|encyclopedia=Encyclopedia of Law and Economics|publisher=Edward Elgar and the University of Ghent|access-date=2 February 2014|date=|archive-date=1 December 2001|archive-url=https://web.archive.org/web/20011201012805/http://encyclo.findlaw.com/2500book.pdf|url-status=dead}} David Gordon Wilson first proposed this type of tax in 1973.{{Cite web |last=Massachusetts Institute of Technology |date=November 5, 2013 |title=Emeritus: David Wilson was an early proponent of the concept of energy-use fees |url=https://phys.org/news/2013-11-emeritus-david-wilson-early-proponent.html |url-status=live |archive-url=https://web.archive.org/web/20210214003540/https://phys.org/news/2013-11-emeritus-david-wilson-early-proponent.html |archive-date=14 February 2021 |access-date=2023-08-23 |website=Phys.org |language=en}} Unlike classic command and control regulations, which explicitly limit or prohibit emissions by each individual polluter,{{cite book|title=Environmental Law and Policy in the Canadian Context|last=Greenbaum|first=Allan|publisher=Captus Press|year=2010|isbn=978-1-55322-171-5|location=Concord, Ontario|pages=240–241}} a carbon tax aims to allow market forces to determine the most efficient way to reduce pollution.{{cite news |last1=MacGuineas |first1=Maya |title=There's a blatantly obvious way for the US to fight climate change and pay for new infrastructure: a carbon tax |url=https://www.businessinsider.com/carbon-tax-climate-change-pollution-economy-us-biden-infrastructure-2021-3 |access-date=15 September 2022 |work=Business Insider |quote=A carbon tax would regulate pollution far more efficiently than the mounds of regulations and restrictions on the books. |archive-date=15 September 2022 |archive-url=https://web.archive.org/web/20220915135825/https://www.businessinsider.com/carbon-tax-climate-change-pollution-economy-us-biden-infrastructure-2021-3 |url-status=live }} A carbon tax is an indirect tax—a tax on a transaction—as opposed to a direct tax, which taxes income. Carbon taxes are price instruments since they set a price rather than an emission limit.{{cite journal|year=2006|title=Regulation by prices, quantities or both: an update and an overview|url=https://academic.oup.com/oxrep/article-abstract/22/2/226/334720|journal=Oxford Review of Economic Policy|volume=22|issue=2|pages=226–247|doi=10.1093/oxrep/grj014|author=Hepburn, C.|access-date=30 August 2009|archive-date=3 July 2019|archive-url=https://web.archive.org/web/20190703215849/https://academic.oup.com/oxrep/article-abstract/22/2/226/334720|url-status=live}} In addition to creating incentives for energy conservation, a carbon tax puts renewable energy such as wind, solar and geothermal on a more competitive footing.

In economic theory, pollution is considered a negative externality, a negative effect on a third party not directly involved in a transaction, and is a type of market failure. To confront the issue, economist Arthur Pigou proposed taxing the goods (in this case hydrocarbon fuels), that were the source of the externality ({{Chem|CO|2}}) so as to accurately reflect the cost of the goods to society, thereby internalizing the production costs. A tax on a negative externality is called a Pigovian tax, which should equal the cost.{{cite journal |author=Helm, D. |year=2005 |title=Economic Instruments and Environmental Policy |url=https://ora.ox.ac.uk/objects/uuid:0c96550f-0cc2-4e5a-959f-1b225ece7fd6/download_file?file_format=application%2Fpdf&safe_filename=Economic%2Binstruments%2Band%2Benvironmental%2Bpolicy.pdf |url-status=live |journal=The Economic and Social Review |volume=36 |issue=3 |pages=205–228 |archive-url=https://web.archive.org/web/20231031142628/https://ora.ox.ac.uk/objects/uuid:0c96550f-0cc2-4e5a-959f-1b225ece7fd6/download_file?file_format=application%2Fpdf&safe_filename=Economic%2Binstruments%2Band%2Benvironmental%2Bpolicy.pdf |archive-date=31 October 2023 |access-date=8 April 2011}}

Within Pigou's framework, the changes involved are marginal, and the size of the externality is assumed to be small enough not to distort the economy.{{cite journal |year=2005 |author=Helm, Dieter |title=Economic Instruments and Environmental Policy |journal=The Economic and Social Review |volume=36 |issue=3 |url=http://www.tara.tcd.ie/bitstream/handle/2262/60159/02_Helm_article.pdf?sequence=1&isAllowed=y |access-date=2023-08-25 |issn=0012-9984 |archive-date=6 October 2022 |archive-url=https://web.archive.org/web/20221006170527/http://www.tara.tcd.ie/bitstream/handle/2262/60159/02_Helm_article.pdf?sequence=1&isAllowed=y |url-status=live }} Climate change is claimed to result in catastrophe (non-marginal) changes.{{cite book |year = 2005 |editor = Helm, D. |title = Climate change Policy: A Survey. In: "Climate Change Policy" |publisher = Oxford University Press |isbn = 978-0-19-928145-9 |url = http://www.dieterhelm.co.uk/publications/ClimateChangePolicy_ASurvey.pdf |access-date = 2 September 2009 |url-status = dead |archive-url = https://web.archive.org/web/20110501072349/http://www.dieterhelm.co.uk/publications/ClimateChangePolicy_ASurvey.pdf |archive-date = 1 May 2011 }}{{cite book|url=http://www.hm-treasury.gov.uk/sternreview_index.htm |title=2.6 Non-marginal policy decisions. In: Stern Review on the Economics of Climate Change |publisher=Print version: Cambridge University Press. Pre-publication version: HM Treasury website |year=2007 |pages=34–35 |author=Stern, N. |access-date=8 April 2011 |url-status=dead |archive-url=https://web.archive.org/web/20100309074040/http://www.hm-treasury.gov.uk/sternreview_index.htm |archive-date=9 March 2010 |edition=pre-publication }} "Non-marginal" means that the impact could significantly reduce the growth rate in income and welfare. The amount of resources that should be devoted to climate change mitigation is controversial. Policies designed to reduce carbon emissions could have a non-marginal impact, but are asserted to not be catastrophic.{{cite journal|year=2008|title=Climate-change policy: why has so little been achieved?|url=http://www.dieterhelm.co.uk/node/671|journal=Oxford Review of Economic Policy|volume=24|issue=2|pages=211–238|doi=10.1093/oxrep/grn014|author=Helm, D.|access-date=2 September 2009|archive-date=1 May 2011|archive-url=https://web.archive.org/web/20110501072338/http://www.dieterhelm.co.uk/node/671|url-status=live}}

The design of a carbon tax involves two primary factors: the level of the tax, and the use of the revenue.{{Cite web |last=Gleckman |first=Howard |title=How Should The U.S. Spend Carbon Tax Revenue? |url=https://www.forbes.com/sites/howardgleckman/2019/01/24/how-should-the-us-spend-carbon-tax-revenue/ |url-status=live |archive-url=https://web.archive.org/web/20211017185954/https://www.forbes.com/sites/howardgleckman/2019/01/24/how-should-the-us-spend-carbon-tax-revenue/ |archive-date=17 October 2021 |access-date=2021-10-17 |website=Forbes |language=en}} The former is based on the social cost of carbon (SCC), which attempts to calculate the numeric cost of the externalities of carbon pollution. The precise number is the subject of debate in environmental and policy circles. A higher SCC corresponds with a higher evaluation of the costs of carbon pollution on society. Stanford University scientists have estimated the social cost of carbon to be upwards of $200 per ton.{{Cite web |last=University |first=Stanford |date=2015-01-12 |title=Estimated social cost of climate change not accurate, Stanford scientists say |url=https://news.stanford.edu/2015/01/12/emissions-social-costs-011215/ |url-status=live |archive-url=https://web.archive.org/web/20211017185954/https://news.stanford.edu/2015/01/12/emissions-social-costs-011215/ |archive-date=17 October 2021 |access-date=2021-10-17 |website=Stanford News |language=en}} More conservative estimates pin the cost at around $50.{{Cite web |date=2020-07-30 |title=The Trump EPA is vastly underestimating the cost of carbon dioxide pollution to society, new research finds » Yale Climate Connections |url=http://yaleclimateconnections.org/2020/07/trump-epa-vastly-underestimating-the-cost-of-carbon-dioxide-pollution-to-society-new-research-finds/ |url-status=live |archive-url=https://web.archive.org/web/20211119230019/https://yaleclimateconnections.org/2020/07/trump-epa-vastly-underestimating-the-cost-of-carbon-dioxide-pollution-to-society-new-research-finds/ |archive-date=19 November 2021 |access-date=2021-10-17 |website=Yale Climate Connections |language=en-US}}{{Cite web |date=2021-04-01 |title=Social Cost of Carbon: What Is It, and Why Do We Need to Calculate It? |url=https://news.climate.columbia.edu/2021/04/01/social-cost-of-carbon/ |url-status=live |archive-url=https://web.archive.org/web/20210908012116/https://news.climate.columbia.edu/2021/04/01/social-cost-of-carbon/ |archive-date=8 September 2021 |access-date=2021-10-17 |website=State of the Planet |language=en}}

The use of the revenue is another subject of debate in carbon tax proposals. A government may use revenue to increase its discretionary spending, or address deficits. However, such proposals often run the risk of being regressive, and sparking backlash among the public due to an increased cost of energy associated with such taxes.{{Cite news |date=2018-12-05 |title=France protests: Fuel tax rises in 2019 budget dropped |language=en-GB |work=BBC News |url=https://www.bbc.com/news/world-europe-46460445 |url-status=live |access-date=2021-10-17 |archive-url=https://web.archive.org/web/20211017185952/https://www.bbc.com/news/world-europe-46460445 |archive-date=17 October 2021}} To avoid this and increase the popularity of a carbon tax, a government may make the carbon tax revenue-neutral.{{Cite web |date=2018-12-04 |title=How to make a carbon tax popular? Give the proceeds to the people |url=http://www.theguardian.com/world/2018/dec/04/how-to-make-a-carbon-tax-popular-give-the-profits-to-the-people |url-status=live |archive-url=https://web.archive.org/web/20211020041803/https://www.theguardian.com/world/2018/dec/04/how-to-make-a-carbon-tax-popular-give-the-profits-to-the-people |first=Leyland |last=Cecco |archive-date=20 October 2021 |access-date=2021-10-17 |website=the Guardian |language=en}}{{Cite web |last=Meyer |first=Robinson |date=2019-11-13 |title=How to Cut U.S. Carbon Pollution by Nearly 40 Percent in 10 Years |url=https://www.theatlantic.com/science/archive/2019/11/bipartisan-carbon-tax-columbia-study/601897/ |url-status=live |archive-url=https://web.archive.org/web/20211017185953/https://www.theatlantic.com/science/archive/2019/11/bipartisan-carbon-tax-columbia-study/601897/ |archive-date=17 October 2021 |access-date=2021-10-17 |website=The Atlantic |language=en}} This can be done by reducing income tax proportionate to the level of the carbon tax, or by returning carbon tax revenues to citizens as a dividend.{{Cite web |last=Cumbers |first=John |title=This Climate Bill Would Actually Send Checks To Americans. Can It Help Save The Planet And Grow Our Economy? |url=https://www.forbes.com/sites/johncumbers/2021/08/03/this-climate-bill-would-actually-send-checks-to-americans-can-it-help-save-the-planet-and-grow-our-economy/ |access-date=2021-10-17 |website=Forbes |language=en |archive-date=17 October 2021 |archive-url=https://web.archive.org/web/20211017185953/https://www.forbes.com/sites/johncumbers/2021/08/03/this-climate-bill-would-actually-send-checks-to-americans-can-it-help-save-the-planet-and-grow-our-economy/ |url-status=live }}

Carbon leakage happens when the regulation of emissions in one country/sector pushes those emissions to other places that with less regulation.{{cite web|year=2007|title=11.7.2 Carbon leakage. In (book chapter): Mitigation from a cross-sectoral perspective. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz et al. Eds.)|publisher=Print version: Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.. This version: IPCC website|author=Barker, T.|url=http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch11s11-7-2.html|access-date=5 April 2010|display-authors=etal|archive-url=https://web.archive.org/web/20100503032254/http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch11s11-7-2.html|archive-date=3 May 2010|url-status=dead}} Leakage effects can be both negative (i.e., increasing the effectiveness of reducing overall emissions) and positive (reducing the effectiveness of reducing overall emissions).{{cite web|year=2007|title=Executive Summary. In (book chapter): Mitigation from a cross-sectoral perspective. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz et al. Eds.)|publisher=Print version: Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.. This version: IPCC website|author=Barker, T.|url=http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch11s11-es.html|access-date=5 April 2010|display-authors=etal|archive-url=https://web.archive.org/web/20100331200123/http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch11s11-es.html|archive-date=31 March 2010|url-status=dead}} Negative leakages, which are desirable, can be referred to as "spill-over".{{cite web |year = 2007 |title = Glossary A-D. In (section): Annex I. In (book): Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz et al. Eds.) |publisher = Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A. |author = IPCC |url = http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-a-d.html |access-date = 18 April 2010 |url-status = dead |archive-url = https://web.archive.org/web/20100503041544/http://www.ipcc.ch/publications_and_data/ar4/wg3/en/annex1sglossary-a-d.html |archive-date = 3 May 2010 }}

According to one study, short-term leakage effects need to be judged against long-term effects.{{cite book|year=1996|author=Goldemberg, J.|title=Introduction: scope of the assessment. In: Climate Change 1995: Economic and Social Dimensions of Climate Change. Contribution of Working Group III to the Second Assessment Report of the Intergovernmental Panel on Climate Change (J.P. Bruce et al. Eds.)|publisher=This version: Printed by Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A. PDF version: IPCC website|url=https://archive.org/details/climatechange1990000unse_h1m9|isbn=978-0-521-56854-8|display-authors=etal|url-access=registration}}{{Rp|28}} A policy that, for example, establishes carbon taxes only in developed countries might leak emissions to developing countries. However, a desirable negative leakage could occur due to reduced demand for coal, oil, and gas in developed countries, lowering prices. This could allow developing countries to substitute oil or gas for coal, lowering emissions. In the long-run, however, if less polluting technologies are delayed, this substitution might have no long-term benefit.

Carbon leakage is central to climate policy, given the 2030 Energy and Climate Framework and the review of the European Union's third carbon leakage list.{{cite report |last1=Marcu|first1=Andrei|title=Carbon Leakage: An overview|date=December 2013|url=http://aei.pitt.edu/46163/1/Special_Report_No_79_Carbon_Leakage.pdf|access-date=21 May 2020|journal=|archive-date=24 November 2020|archive-url=https://web.archive.org/web/20201124182101/http://aei.pitt.edu/46163/1/Special_Report_No_79_Carbon_Leakage.pdf|url-status=live}}

{{Excerpt|Carbon tariff}}

Research shows that carbon taxes effectively reduce greenhouse gas emissions.{{Cite journal |last=Andersson |first=Julius J. |date=November 2019 |title=Carbon Taxes and {{CO2}} Emissions: Sweden as a Case Study |journal=American Economic Journal: Economic Policy |language=en |volume=11 |issue=4 |pages=1–30 |doi=10.1257/pol.20170144 |issn=1945-7731 |doi-access=free}}{{Cite journal |last1=Murray |first1=Brian |last2=Rivers |first2=Nicholas |date=1 November 2015 |title=British Columbia's revenue-neutral carbon tax: A review of the latest "grand experiment" in environmental policy |journal=Energy Policy |volume=86 |pages=674–683 |doi=10.1016/j.enpol.2015.08.011 |bibcode=2015EnPol..86..674M |issn=0301-4215}} Most economists assert that carbon taxes are the most efficient and effective way to curb climate change, with the least adverse economic effects.{{Cite web |title=Carbon Taxes II |url=http://www.igmchicago.org/surveys/carbon-taxes-ii |url-status=live |archive-url=https://web.archive.org/web/20161126064548/http://www.igmchicago.org/surveys/carbon-taxes-ii |archive-date=26 November 2016 |access-date=6 July 2019 |website=igmchicago.org}}{{Cite web |title=Carbon Tax {{!}} IGM Forum |url=http://www.igmchicago.org/surveys/carbon-tax |url-status=live |archive-url=https://web.archive.org/web/20161126002859/http://www.igmchicago.org/surveys/carbon-tax |archive-date=26 November 2016 |access-date=6 July 2019 |language=en-US}}{{Cite web |title=Climate Change Policies |url=http://www.igmchicago.org/surveys/climate-change-policies |url-status=live |archive-url=https://web.archive.org/web/20181118111617/http://www.igmchicago.org/surveys/climate-change-policies |archive-date=18 November 2018 |access-date=6 July 2019 |website=igmchicago.org}}{{Cite journal |last1=Zhang |first1=Kun |last2=Wang |first2=Qian |last3=Liang |first3=Qiao-Mei |last4=Chen |first4=Hao |date=1 May 2016 |title=A bibliometric analysis of research on carbon tax from 1989 to 2014 |journal=Renewable and Sustainable Energy Reviews |volume=58 |pages=297–310 |doi=10.1016/j.rser.2015.12.089 |issn=1364-0321}}{{Cite journal |last1=Loewenstein |first1=George |last2=Ho |first2=Emily H. |last3=Hagmann |first3=David |year=2019 |title=Nudging out support for a carbon tax |journal=Nature Climate Change |language=en |volume=9 |issue=6 |pages=484–489 |bibcode=2019NatCC...9..484H |doi=10.1038/s41558-019-0474-0 |issn=1758-6798 |s2cid=182663891}}

One study found that Sweden's carbon tax successfully reduced carbon dioxide emissions from transport by 11%. A 2015 British Columbia study found that the taxes reduced greenhouse gas emissions by 5–15% while having negligible overall economic effects. A 2017 British Columbia study found that industries on the whole benefited from the tax and "small but statistically significant 0.74 percent annual increases in employment" but that carbon-intensive and trade-sensitive industries were adversely affected.{{Cite journal |last=Yamazaki |first=Akio |date=1 May 2017 |title=Jobs and climate policy: Evidence from British Columbia's revenue-neutral carbon tax |journal=Journal of Environmental Economics and Management |volume=83 |pages=197–216 |doi=10.1016/j.jeem.2017.03.003 |issn=0095-0696 |s2cid=157293760}} A 2020 study of carbon taxes in wealthy democracies showed that carbon taxes had not limited economic growth.{{Cite journal |last=Driscoll |first=Daniel |date=January 2020 |title=Do Carbon Prices Limit Economic Growth? |journal=Socius: Sociological Research for a Dynamic World |language=en-US |volume=6 |pages=237802311989832 |doi=10.1177/2378023119898326 |issn=2378-0231 |doi-access=free}}

Carbon taxes appear to not adversely affect employment or GDP growth in Europe.{{Cite journal |last1=Metcalf |first1=Gilbert E. |last2=Stock |first2=James H. |date=2023 |title=The Macroeconomic Impact of Europe's Carbon Taxes |url=https://www.aeaweb.org/articles?id=10.1257/mac.20210052 |journal=American Economic Journal: Macroeconomics |language=en |volume=15 |issue=3 |pages=265–286 |doi=10.1257/mac.20210052 |issn=1945-7707 |access-date=30 June 2023 |archive-date=30 June 2023 |archive-url=https://web.archive.org/web/20230630135346/https://www.aeaweb.org/articles?id=10.1257/mac.20210052 |url-status=live }} Their economic impact ranges from zero to modest positive.

A number of studies have found that in the absence of an increase in social benefits and tax credits, a carbon tax would hit poor households harder than rich households.{{Cite journal |last1=Callan |first1=Tim |last2=Lyons |first2=Sean |last3=Scott |first3=Susan |last4=Tol |first4=Richard S. J. |last5=Verde |first5=Stefano |date=1 February 2009 |title=The distributional implications of a carbon tax in Ireland |url=http://www.esri.ie/pubs/WP250.pdf |url-status=live |journal=Energy Policy |volume=37 |issue=2 |pages=407–412 |doi=10.1016/j.enpol.2008.08.034 |bibcode=2009EnPol..37..407C |issn=0301-4215 |archive-url=https://web.archive.org/web/20171127224140/https://www.esri.ie/pubs/WP250.pdf |archive-date=27 November 2017 |access-date=27 August 2019 |hdl-access=free |hdl=10419/50117}}{{Cite journal |last=Berry |first=Audrey |date=1 January 2019 |title=The distributional effects of a carbon tax and its impact on fuel poverty: A microsimulation study in the French context |journal=Energy Policy |volume=124 |pages=81–94 |doi=10.1016/j.enpol.2018.09.021 |bibcode=2019EnPol.124...81B |issn=0301-4215 |s2cid=158913661}}{{Cite journal |last=Renner |first=Sebastian |date=1 January 2018 |title=Poverty and distributional effects of a carbon tax in Mexico |url=http://www2.vwl.wiso.uni-goettingen.de/courant-papers/CRC-PEG_DP_223.pdf |url-status=live |journal=Energy Policy |volume=112 |pages=98–110 |doi=10.1016/j.enpol.2017.10.011 |bibcode=2018EnPol.112...98R |issn=0301-4215 |s2cid=54517573 |archive-url=https://web.archive.org/web/20200307125624/http://www2.vwl.wiso.uni-goettingen.de/courant-papers/CRC-PEG_DP_223.pdf |archive-date=7 March 2020 |access-date=27 August 2019}}{{Cite journal |last1=Mathur |first1=Aparna |last2=Morris |first2=Adele C. |date=1 March 2014 |title=Distributional effects of a carbon tax in broader U.S. fiscal reform |journal=Energy Policy |volume=66 |pages=326–334 |doi=10.1016/j.enpol.2013.11.047 |bibcode=2014EnPol..66..326M |issn=0301-4215 |s2cid=13852853}} Gilbert E. Metcalf disputed that carbon taxes would be regressive in the US.{{Cite journal |last=Metcalf |first=Gilbert E. |date=1 June 2019 |title=The distributional impacts of U.S. energy policy |journal=Energy Policy |volume=129 |pages=926–929 |doi=10.1016/j.enpol.2019.01.076 |bibcode=2019EnPol.129..926M |issn=0301-4215 |s2cid=159432258}}

Carbon taxes can increase electricity prices.{{cite news |author1=Stanley Reed |date=22 September 2021 |title=Here's What's Behind Europe's Surging Energy Prices |work=The New York Times |url=https://www.nytimes.com/2021/09/22/business/energy-prices-europe-britain.html |access-date=24 September 2021 |quote=High carbon taxes are also stoking power prices |archive-date=23 September 2021 |archive-url=https://web.archive.org/web/20210923180141/https://www.nytimes.com/2021/09/22/business/energy-prices-europe-britain.html |url-status=live }}

There is a debate about the relation between carbon pricing (like carbon emission trading and carbon tax) and climate justice. Carbon pricing can be adjusted to some principles of climate justice like polluters pay.{{cite book |last1=Gajevic Sayegh |first1=Alexandre |url=https://www.nottingham.ac.uk/climateethicseconomics/documents/papers-workshop-2/gajevic-sayegh.pdf |title=CLIMATE JUSTICE AND CARBON PRICING |publisher=Department of Philosophy University College London |access-date=13 March 2024}} Many proponents of climate justice object to carbon pricing. To close the gap between the two concepts, carbon pricing could put a cap on emissions, remove pollution from underserved communities, and justly divide revenues.{{cite journal |last1=K. Boyce |first1=James |last2=Ash |first2=Michael |last3=Ranalli |first3=Brent |date=28 February 2023 |title=Environmental Justice and Carbon Pricing: Can They Be Reconciled? |journal=Global Challenges |volume=7 |issue=4 |doi=10.1002/gch2.202200204 |pmid=37020631 |pmc=10069313 |bibcode=2023GloCh...700204B }}

Since carbon taxation was first proposed, numerous economists have described its strengths as a means of reducing CO2 pollution. This tax has been praised as "a far better way to control pollution than the present method of specific regulation."{{cite book |last1=Friedman |first1=Milton |title=Free to Choose: A Personal Statement |title-link=Free to Choose |last2=Friedman |first2=Rose |publisher=Harcourt |year=1990 |isbn=978-0-156-33460-0 |edition=1st Harvest |place=New York |pages=213–218 |author-link1=Milton Friedman |author2-link=Rose Friedman |orig-year=1980}} It has also been lauded for its market based simplicity. This includes a description as "the most efficient way to guide the decisions of producers and consumers", since "carbon emissions have an 'unpriced' societal cost in terms of their deleterious effects on the earth's climate."{{cite news|last=Tyson|first=Laura|title=The Myriad Benefits of a Carbon Tax|url=https://economix.blogs.nytimes.com/2013/06/28/the-myriad-benefits-of-a-carbon-tax/#more-164986|access-date=28 June 2013|work=The New York Times|date=28 June 2013|archive-date=9 July 2013|archive-url=https://web.archive.org/web/20130709002726/http://economix.blogs.nytimes.com/2013/06/28/the-myriad-benefits-of-a-carbon-tax/#more-164986|url-status=live}}

However, carbon taxes have been opposed by a substantial proportion of the public. They have also been rejected in several elections, and in some cases reversed as opposition increased. One response has been to specifically allocate carbon tax revenues back to the public in order to garner support.{{Cite journal |last1=Mildenberger |first1=Matto |last2=Lachapelle |first2=Erick |last3=Harrison |first3=Kathryn |last4=Stadelmann-Steffen |first4=Isabelle |date=February 2022 |title=Limited impacts of carbon tax rebate programmes on public support for carbon pricing |journal=Nature Climate Change |language=en |volume=12 |issue=2 |pages=141–147 |doi=10.1038/s41558-021-01268-3 |bibcode=2022NatCC..12..141M |s2cid=246243241 |issn=1758-6798 |doi-access=free }} Citizens' Climate Lobby is an international organization with over 500 chapters.{{Cite web |title=Citizens' Climate Lobby Chapters |url=https://citizensclimatelobby.org/about-ccl/chapters/ |access-date=2023-08-24 |website=Citizens' Climate Lobby |language=en-US |archive-date=6 March 2023 |archive-url=https://web.archive.org/web/20230306111400/https://citizensclimatelobby.org/about-ccl/chapters/ |url-status=live }} It advocates for carbon tax legislation in the form of a progressive fee and dividend structure. NASA climatologist James E. Hansen has also spoken in favor of a revenue neutral carbon fee.{{Cite web |last=Adler |first=Ben |date=2015-07-23 |title=James Hansen's new climate study is terrifying, but he still has hope |url=https://grist.org/climate-energy/james-hansens-new-climate-study-is-terrifying-but-he-still-has-hope/ |access-date=2023-08-24 |website=Grist |language=en-us |archive-date=4 February 2023 |archive-url=https://web.archive.org/web/20230204063933/https://grist.org/climate-energy/james-hansens-new-climate-study-is-terrifying-but-he-still-has-hope/ |url-status=live }}

Since 2019 over 3,500 U.S. economists have signed The Economists' Statement on Carbon Dividends.{{Cite web |title=All Signatories |url=https://www.econstatement.org/all-signatories |website=Economists' Statement on Carbon Dividends |access-date=23 August 2023 |archive-date=2 March 2023 |archive-url=https://web.archive.org/web/20230302150318/https://www.econstatement.org/all-signatories |url-status=live }} This statement describes the benefits of a U.S. carbon tax along with suggestions for how it could be developed. One recommendation is to return revenues generated by a tax to the general public. The statement was originally signed by 45 Nobel Prize winning economists, former chairs of the Federal Reserve, former chairs of the CEA, and former secretaries of the Treasury Department.{{Cite news |date=January 16, 2019 |title=Economists' Statement on Carbon Dividends |work=The Wall Street Journal |url=https://www.wsj.com/articles/economists-statement-on-carbon-dividends-11547682910 |access-date=23 August 2023 |archive-date=7 June 2023 |archive-url=https://web.archive.org/web/20230607140351/https://www.wsj.com/articles/economists-statement-on-carbon-dividends-11547682910 |url-status=live }}{{Cite news |last=Dlouhy |first=Jennifer |date=January 16, 2019 |title=From Greenspan to Yellen, Economic Brain Trust Backs Carbon Tax |work=Bloomberg |url=https://www.bloomberg.com/news/articles/2019-01-17/from-greenspan-to-yellen-economic-brain-trust-backs-carbon-tax |access-date=23 August 2023 |archive-date=7 May 2021 |archive-url=https://web.archive.org/web/20210507043409/https://www.bloomberg.com/news/articles/2019-01-17/from-greenspan-to-yellen-economic-brain-trust-backs-carbon-tax |url-status=live }} It has been recognized as a historic example of consensus amongst economists.{{Cite web |title=History is Made – The Economists' Statement on Carbon Dividends |url=https://www.historyismade.org/ |access-date=2023-08-23 |website=www.historyismade.org |archive-date=23 August 2023 |archive-url=https://web.archive.org/web/20230823211319/https://www.historyismade.org/ |url-status=live }}

Ben Ho, professor of economics at Vassar College, has argued that "while carbon taxes are part of the optimal portfolio of policies to fight climate change, they are not the most important part."{{Cite web |title=Prioritising innovation: the case against the carbon tax |url=https://impact.economist.com/sustainability/net-zero-and-energy/prioritising-innovation-the-case-against-the-carbon-tax-ben-ho |url-status=live |archive-url=https://web.archive.org/web/20230717215711/https://impact.economist.com/sustainability/net-zero-and-energy/prioritising-innovation-the-case-against-the-carbon-tax-ben-ho |archive-date=17 July 2023 |access-date=2023-07-17 |website=impact.economist.com |language=en-gb}}

In some instances knowledge about how carbon tax revenues are used can affect public support. Dedicating revenues to climate projects and compensating low income housing have been found to be popular uses of revenue.{{Cite journal |last1=Maestre-Andrés |first1=Sara |last2=Drews |first2=Stefan |last3=Savin |first3=Ivan |last4=van den Bergh |first4=Jeroen |date=2021-12-02 |title=Carbon tax acceptability with information provision and mixed revenue uses |journal=Nature Communications |language=en |volume=12 |issue=1 |pages=7017 |doi=10.1038/s41467-021-27380-8 |pmid=34857763 |pmc=8640071 |bibcode=2021NatCo..12.7017M |issn=2041-1723 }} However, providing information about specific revenue uses in countries that have implemented carbon taxes has been shown to have limited effectiveness in increasing public support.

A 2021 poll conducted by GlobeScan on 31 countries and territories found that 62 percent on average are supportive of a carbon tax, while only 33 percent are opposed to a carbon tax. In 28 of the 31 countries and territories listed in the poll, a majority of their populations are supportive of a carbon tax.{{Cite web |last=Miller |first=Robin |date=2021-11-05 |title=New Global Poll Shows Growing Public Support for a Carbon Tax |url=https://globescan.com/2021/11/05/new-global-poll-shows-growing-public-support-for-carbon-tax/ |url-status=live |archive-url=https://web.archive.org/web/20230717212326/https://globescan.com/2021/11/05/new-global-poll-shows-growing-public-support-for-carbon-tax/ |archive-date=17 July 2023 |access-date=2023-07-17 |website=GlobeScan {{!}} Know your world. Lead the future. |language=en-US}}

{{update|section|date=March 2023}}

{{Main|Carbon emission trading}}

Carbon emission trading (also called cap and trade) is another approach. Emission levels are limited and emission permits traded among emitters. The permits can be issued via government auctions or by offered without charge based on existing emissions (grandfathering). Auctions raise revenues that can be used to reduce other taxes or to fund government programs.{{cite web|date=11 June 2008|title=Environmentally Related Taxes and Tradable Permit Systems in Practice|publisher=OECD, Environment Directorate, Centre for Tax Policy and Administration|url=https://one.oecd.org/document/COM/ENV/EPOC/CTPA/CFA(2007)31/FINAL/en/pdf|author=Smith, S.|access-date=26 August 2009|archive-date=19 January 2022|archive-url=https://web.archive.org/web/20220119122710/https://one.oecd.org/document/COM/ENV/EPOC/CTPA/CFA(2007)31/FINAL/en/pdf|url-status=live}} Variations include setting price-floor and/or price-ceiling for permits. A carbon tax can be combined with trading.

A cap with grandfathered permits can have an efficiency advantage since it applies to all industries. Cap and trade provides an equal incentive for all producers at the margin to reduce their emissions. This is an advantage over a tax that exempts or has reduced rates for certain sectors.

Both carbon taxes and trading systems aim to reduce emissions by creating a price for emitting {{CO2}}.Jacobsen, Mark. "Environmental Economics Lecture 6–7." UCSD Econ 131. Econ 131 Lecture, 20 October 2016, San Diego, UCSD. In the absence of uncertainty both systems will result in the efficient market quantity and price of {{CO2}}."Which Is Better: Carbon Tax or Cap-and-Trade?" Grantham Research Institute on Climate Change and the Environment, London School of Economics, 21 March 2014, London School of Economics/GranthamInstitute/faqs/which-is-better-carbon-tax-or-cap-and-trade/. When the environmental damage and therefore the appropriate tax of each unit of {{CO2}} cannot be accurately calculated, a permit system may be more advantageous. In the case of uncertainty regarding the costs of {{CO2}} abatement for firms, a tax is preferable."Cap and Trade vs. Taxes." Center for Climate and Energy Solutions, Center for Climate and Energy Solutions, 24 October 2017, www.c2es.org/document/cap-and-trade-vs-taxes/.

Permit systems regulate total emissions. In practice the limit has often been set so high that permit prices are not significant. In the first phase of the European Union Emissions Trading System,"EU Emissions Trading System (EU ETS)." Icapcarbonaction.com, International Carbon Action Partnership, 10 October 2017, icapcarbonaction.com/en/?option=com_etsmap&task=export&format=pdf&layout=list&systems[]=43 firms reduced their emissions to their allotted quantity without the purchase of any additional permits. This drove permit prices to nearly zero two years later, crashing the system and requiring reforms that would eventually appear in EUETS Phase 3."EU Emissions Trading System (EU ETS)." Icapcarbonaction.com, International Carbon Action Partnership, 10 October 2017, icapcarbonaction.com/en/?option=com_etsmap&task=export&format=pdf&layout=list&systems[]=43.

The distinction between carbon taxes and permit systems can get blurred when hybrid systems are allowed. A hybrid sets limits on price movements, potentially softening the cap. When the price gets too high, the issuing authority issues additional permits at that price. A price floor may be breached when emissions are so low that no one needs to buy a permit.{{Cite journal|last1=Burtraw|first1=Dallas|last2=Palmer|first2=Karen|last3=Kahn|first3=Danny|date=1 September 2010|title=A symmetric safety valve|journal=Energy Policy|series=Special Section on Carbon Emissions and Carbon Management in Cities with Regular Papers|volume=38|issue=9|pages=4921–4932|doi=10.1016/j.enpol.2010.03.068|bibcode=2010EnPol..38.4921B |issn=0301-4215}} Economist Gilbert Metcalf has proposed such a system, the Emissions Assurance Mechanism,{{Cite web|url=https://www.rff.org/publications/reports/an-emissions-assurance-mechanism-adding-environmental-certainty-to-a-carbon-tax/|title=An Emissions Assurance Mechanism: Adding Environmental Certainty to a Carbon Tax|website=Resources for the Future|language=en-US|access-date=11 October 2019|archive-date=20 November 2021|archive-url=https://web.archive.org/web/20211120191535/https://www.rff.org/publications/reports/an-emissions-assurance-mechanism-adding-environmental-certainty-to-a-carbon-tax/|url-status=live}} and the idea, in principle, has been adopted by the Climate Leadership Council.{{Cite web|url=https://www.clcouncil.org/our-plan/|title=The Four Pillars of Our Carbon Dividends Plan|website=clcouncil.org|date=20 February 2017 |access-date=11 October 2019|archive-date=11 October 2019|archive-url=https://web.archive.org/web/20191011103715/https://www.clcouncil.org/our-plan/|url-status=live}}

James E. Hansen argued in 2009 that emissions trading would only make money for banks and hedge funds and allow business-as-usual for the chief carbon-emitting industries.James Hansen. Storms of My Grandchildren Bloomsbury, London 2009 {{ISBN|978-1-4088-0744-6}} p. 241.{{cite news |last=Randerson |first=James |date=2 January 2009 |title=Nasa climate expert makes personal appeal to Obama |work=The Guardian |location=London |url=https://www.theguardian.com/environment/2009/jan/02/obama-climate-change-james-hansen |url-status=live |access-date=10 December 2009 |archive-url=https://web.archive.org/web/20130905161236/http://www.theguardian.com/environment/2009/jan/02/obama-climate-change-james-hansen |archive-date=5 September 2013}}

{{excerpt|Carbon offsets and credits|paragraphs=1-2}}

{{Further|Energy tax|Carbon fee and dividend}}

Two related taxes are emissions taxes and energy taxes. An emissions tax on greenhouse gas emissions requires individual emitters to pay a fee, charge, or tax for every tonne of greenhouse gas, while an energy tax is applied to the fuels themselves.

In terms of climate change mitigation, a carbon tax is not a perfect substitute for an emissions tax.{{Cite book |url=http://archive.org/details/climatechange1990000unse_h1m9 |title=Climate change 1995 : economic and social dimensions of climate change |date=1996 |publisher=Cambridge [England]; New York: Published for the Intergovernmental Panel on Climate Change [by] Cambridge University Press |via=Internet Archive |isbn=978-0-521-56854-8}} For example, a carbon tax encourages reduced fuel use, but it does not encourage emissions reduction such as carbon capture and storage.

Energy taxes increase the price of energy regardless of emissions.{{rp|416}} An ad valorem energy tax is levied according to the energy content of a fuel or the value of an energy product, which may or may not be consistent with the emitted greenhouse gas amounts and their respective global warming potentials. Studies indicate that to reduce emissions by a certain amount, ad valorem energy taxes would be more costly than carbon taxes. However, although greenhouse gas emissions are an externality, using energy services may result in other negative externalities, e.g., air pollution not covered by the carbon tax (such as ammonia or fine particles). A combined carbon-energy tax may therefore be better at reducing air pollution than a carbon tax alone.{{citation needed|date=May 2019}}

Any of these taxes can be combined with a rebate, where the money collected by the tax is returned to qualifying parties, taxing heavy emitters and subsidizing those that emit less carbon.

Because carbon taxes only target carbon dioxide, they do not target other greenhouse gasses, such as methane, which have a greater warming potential.

Many countries tax fuel directly; for example, the UK imposes a hydrocarbon oil duty directly on vehicle hydrocarbon oils, including petrol and diesel fuel.

While a direct tax sends a clear signal to the consumer, its efficiency at influencing consumers' fuel use has been challenged for reasons including:{{cite web |date=1 February 2008 |title=The cost and effectiveness of policies to reduce vehicle emissions |url=http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP200809.pdf |url-status=dead |archive-url=https://web.archive.org/web/20160305013649/http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP200809.pdf |archive-date=5 March 2016 |publisher=OECD ITF Joint Transport Research Centre}}

• Possible delays of a decade or more as inefficient vehicles are replaced by newer models and the older models filter through the fleet.
• Political pressures that deter policymakers from increasing taxes.
• Limited relationship between consumer decisions on fuel economy and fuel prices. Other efforts, such as fuel efficiency standards, or changing income tax rules on taxable benefits, may be more effective.
• The historical use of fuel taxes as a source of general revenue, given fuel's low price elasticity, which allows higher rates without reducing fuel volumes. In these circumstances, the policy rational may be unclear.

Vehicle fuel taxes may reduce the "rebound effect" that occurs when vehicle efficiency improves. Consumers may make additional journeys or purchase heavier and more powerful vehicles, offsetting the efficiency gains.{{cite web |date=16 November 2007 |title=Oil dependence : Is transport running out of affordable fuel? |url=http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP200805.pdf |url-status=dead |archive-url=https://web.archive.org/web/20101123092103/http://internationaltransportforum.org/jtrc/DiscussionPapers/DP200805.pdf |archive-date=23 November 2010 |publisher=OECD ITF Joint Transport Research Centre}}

A 2018 survey of leading economists found that 58% of the surveyed economists agreed with the assertion, "Carbon taxes are a better way to implement climate policy than cap-and-trade," 31% stated that they had no opinion or that it was uncertain, but none of the respondents disagreed.

In a review study in 1996 the authors concluded that the choice between an international quota (cap) system, or an international carbon tax, remained ambiguous.{{rp|430}} Another study in 2012 compared a carbon tax, emissions trading, and command-and-control regulation at the industry level, concluding that market-based mechanisms would perform better than emission standards in achieving emission targets without affecting industrial production.{{cite journal|year=2012|title=Effectiveness and equity implications of carbon policies in the United States construction industry|journal=Building and Environment|publisher=Elsevier Ltd.|volume=49|pages=259–269|doi=10.1016/j.buildenv.2011.10.002|last1=Lu|first1=Yujie|last2=Zhu|first2=Xinyuan|last3=Cui|first3=Qingbin|bibcode=2012BuEnv..49..259L }}

File:Map of carbon taxes and emissions trading systems worldwide (2021).png |doi=10.1596/978-1-4648-1728-1 |isbn=978-1-4648-1728-1 |language=en |archive-date=16 July 2021}}{{Legend|#d66f51|Carbon tax implemented or scheduled}}{{Legend|#aab68f|Carbon emission trading implemented or scheduled}}

{{Legend|#ffb001|Carbon emission trading or carbon tax under consideration}}]]

Both energy and carbon taxes have been implemented in response to commitments under the United Nations Framework Convention on Climate Change. In most cases the tax is implemented in combination with exemptions.

Indirect carbon prices, such as fuel taxes, are much more common than carbon taxes. In 2021, OECD reported that 67 of the 71 countries it assessed had some form of fuel tax. Only 39 had carbon taxes or ETSs. However, the use of carbon taxes is growing more quickly. In addition, several countries plan to further strengthen existing carbon taxes in the coming years, including Singapore, Canada and South Africa.{{Cite book |last=World Bank |url=https://openknowledge.worldbank.org/handle/10986/39796 |title=State and Trends of Carbon Pricing 2023 |date=May 2023 |isbn=978-1-4648-2006-9 |at=Pages 17-18 |language=en-US}}

Current carbon price policies, including carbon taxes, are still considered insufficient to create the kinds of changes in emissions that would be consistent with Paris Agreement goals. The International Monetary Fund, OECD, and others have stated that current fossil fuel prices generally fail to reflect environmental impacts.

{{Update|inaccurate=yes|section|date=May 2019}}

{{Further|Climate change in Europe}}

In Europe, many countries have imposed energy taxes or energy taxes based partly on carbon content. These include Denmark, Finland, Germany, Ireland, Italy, the Netherlands, Norway, Slovenia, Sweden, Switzerland, and the UK. None of these countries have been able to introduce a uniform carbon tax for fuels in all sectors.{{cite journal |last=Andersen |first=Prof. Mikael Skou |year=2010 |title=Europe's experience with carbon-energy taxation |url=http://sapiens.revues.org/1072 |url-status=live |journal=Sapiens |volume=3 |issue=2 |archive-url=https://web.archive.org/web/20110826171437/http://sapiens.revues.org/1072 |archive-date=26 August 2011 |access-date=24 August 2011}} See. Burgers, Irene J., and Stefan E. Weishaar. Designing Carbon taxes is not an easy task: legal perspectives. No. 559. WIFO Working Papers, 2018. Denmark is the first country to include livestock emissions in their carbon tax system.{{cite news |url=https://www.devex.com/news/what-the-world-can-learn-from-denmark-s-carbon-tax-on-agriculture-107908 |title=What the world can learn from Denmark's carbon tax on agriculture |author=Tais Gadea Lara |work=Devex |date=9 July 2024 |access-date=27 July 2024}}

During the 1990s, a carbon/energy tax was proposed at the EU level but failed due to industrial lobbying.{{cite web |author=Pearce, D. |year=2005 |title=The United Kingdom Climate Change Levy: A study in political economy |url=http://www.olis.oecd.org/olis/2004doc.nsf/LinkTo/NT00009492/$FILE/JT00179396.PDF |url-status=live |archive-url=https://web.archive.org/web/20110501072327/http://www.olis.oecd.org/olis/2004doc.nsf/LinkTo/NT00009492/$FILE/JT00179396.PDF |archive-date=1 May 2011 |access-date=30 August 2009 |publisher=OECD Environment Directorate, Centre for Tax Policy and Administration}} In 2010, the European Commission considered implementing a pan-European minimum tax on pollution permits purchased under the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS) in which the proposed new tax would be calculated in terms of carbon content.{{cite news |last=Kanter |first=James |date=22 June 2010 |title=Europe Considers New Taxes to Promote 'Clean' Energy |work=The New York Times |url=https://www.nytimes.com/2010/06/23/business/energy-environment/23carbon.html?ref=cap_and_trade |url-status=live |access-date=21 February 2017 |archive-url=https://web.archive.org/web/20190301124920/https://www.nytimes.com/2010/06/23/business/energy-environment/23carbon.html?ref=cap_and_trade |archive-date=1 March 2019}} The suggested rate of €4 to €30 per tonne of {{CO2}}.{{cite news |last=Kanter |first=James |date=22 June 2010 |title=Europe Considers New Taxes to Promote 'Clean' Energy |work=The New York Times |url=https://www.nytimes.com/2010/06/23/business/energy-environment/23carbon.html?_r=2&ref=cap_and_trade |url-status=live |access-date=21 February 2017 |archive-url=https://web.archive.org/web/20190301144220/https://www.nytimes.com/2010/06/23/business/energy-environment/23carbon.html?_r=2&ref=cap_and_trade |archive-date=1 March 2019}}

In 1997, Costa Rica imposed a 3.5 percent carbon tax on hydrocarbon fuels.{{cite web |last=Meyer |first=Peter |year=2010 |title=United States. Costa Rica: Background and U.S. Relations |url=http://assets.opencrs.com/rpts/R40593_20100222.pdf |url-status=dead |archive-url=https://web.archive.org/web/20110807121815/http://assets.opencrs.com/rpts/R40593_20100222.pdf |archive-date=7 August 2011}} A portion of the proceeds go to the "Payment for Environmental Services" (PSA) program which gives incentives to property owners to practice sustainable development and forest conservation.{{citation |title=Costa Rica: Experts warn about the dangers of missing environmental targets |date=8 October 2009 |type=PDF }} Approximately 11% of Costa Rica's national territory is protected by the plan.{{cite web |title=Costa Rica: Background and U.S. Relations |url=http://assets.opencrs.com/rpts/R40593_20100222.pdf |url-status=dead |archive-url=https://web.archive.org/web/20110807121815/http://assets.opencrs.com/rpts/R40593_20100222.pdf |archive-date=7 August 2011 |access-date=4 August 2010}} The program now pays out roughly $15 million a year to around 8,000 property owners.{{cite news |date=24 May 2007 |title=Costa Rica aims to win "carbon neutral" race |work=Reuters |url=https://www.reuters.com/article/idUSN2438974220070526 |url-status=live |access-date=30 June 2017 |archive-url=https://web.archive.org/web/20211120191531/https://www.reuters.com/article/idUSN2438974220070526 |archive-date=20 November 2021}}

{{main|Carbon pricing in Canada|Quebec carbon tax|British Columbia Carbon Tax}}

In the 2008 Canadian federal election, a carbon tax proposed by Liberal Party leader Stéphane Dion, known as the Green Shift, became a central issue. It would have been revenue-neutral, balancing increased taxation on carbon with rebates. However, it proved to be unpopular and contributed to the Liberal Party's defeat, earning the lowest vote share since Confederation.{{cite news |last=Bryden |first=Joan |title=Liberals cast themselves in leader's light |url=http://www.thestar.com/news/canada/article/520836 |date=20 October 2008 |work=Toronto Star |archive-url=https://web.archive.org/web/20121013063631/http://www.thestar.com/news/canada/article/520836 |archive-date=13 October 2012 }}{{cite web |last=Bilton |first=Chris |title=Green shifting right? |url=http://www.eyeweekly.com/blog/post/49116 |work=Eye Weekly |date=7 January 2009 |archive-url=https://web.archive.org/web/20110501072424/http://www.eyeweekly.com/blog/post/49116 |archive-date=1 May 2011 }}{{cite news |last=Reid |first=Scott |title=The good, the (mostly) bad, and the faint signs of hope |url=http://www.theglobeandmail.com/servlet/story/RTGAM.20081224.WStrategists1225/BNStory/politics |work=The Globe and Mail |url-status=dead |date=26 December 2009 |archive-url=https://web.archive.org/web/20090308030122/http://www.theglobeandmail.com/servlet/story/RTGAM.20081224.WStrategists1225/BNStory/politics |archive-date=8 March 2009 }}Findlay, Martha Hall. [https://www.theglobeandmail.com/servlet/story/RTGAM.20090119.WFindlay19/BNStory/politics/home After the Green Shift] {{Webarchive|url=https://web.archive.org/web/20090227052540/http://www.theglobeandmail.com/servlet/story/RTGAM.20090119.WFindlay19/BNStory/politics/home|date=27 February 2009}}. The Globe and Mail. 19 January 2009. The Conservative party won the election by promising to "develop and implement a North American-wide cap-and-trade system for greenhouse gases and air pollution, with implementation to occur between 2012 and 2015".{{cite news |title=Case of the Conservatives' carbon amnesia |work=The Globe and Mail |url=https://www.theglobeandmail.com/opinion/case-of-the-conservatives-carbon-amnesia/article4557581/ |url-status=live |access-date=22 August 2017 |archive-url=https://web.archive.org/web/20170210073222/https://www.theglobeandmail.com/opinion/case-of-the-conservatives-carbon-amnesia/article4557581/ |archive-date=10 February 2017}}

In 2018, Canada enacted a revenue-neutral carbon levy starting in 2019,[https://www.canlii.org/en/ca/laws/stat/sc-2018-c-12-s-186/139160/sc-2018-c-12-s-186.html Greenhouse Gas Pollution Pricing Act] {{Webarchive|url=https://web.archive.org/web/20190105082330/https://www.canlii.org/en/ca/laws/stat/sc-2018-c-12-s-186/139160/sc-2018-c-12-s-186.html|date=5 January 2019}}, in force since 21 June 2018 (page visited on 26 October 2018).{{cite news |first=Dana |last=Nuccitelli |url=https://www.theguardian.com/environment/climate-consensus-97-per-cent/2018/oct/26/canada-passed-a-carbon-tax-that-will-give-most-canadians-more-money |title=Canada passed a carbon tax that will give most Canadians more money |url-status=live |archive-url=https://web.archive.org/web/20181129002759/https://www.theguardian.com/environment/climate-consensus-97-per-cent/2018/oct/26/canada-passed-a-carbon-tax-that-will-give-most-canadians-more-money |archive-date=29 November 2018 |work=The Guardian |date=26 October 2018 |access-date=26 October 2018 }} fulfilling Prime Minister Justin Trudeau's campaign pledge. The Greenhouse Gas Pollution Pricing Act applies only to provinces without provincial adequate carbon pricing.

As of September 2020, seven of thirteen Canadian provinces and territories use the federal carbon tax while three have developed their own carbon tax programs.{{Cite web |date=2020-09-24 |title=Carbon Pricing in Canada (Updated 2020) |url=https://www.energyhub.org/carbon-pricing/ |url-status=live |archive-url=https://web.archive.org/web/20201029042654/https://www.energyhub.org/carbon-pricing/ |archive-date=29 October 2020 |access-date=2020-09-27 |website=energyhub.org |language=en-US}}

In December 2020, the federal government released an updated plan with a {{CA$|15}} per tonne per year increase in the carbon pricing, reaching {{CA$|95}} per tonne in 2025 and {{CA$|170}} per tonne in 2030.{{Cite web |title=A HEALTHY ENVIRONMENT AND A HEALTHY ECONOMY |url=https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/climate-plan/healthy_environment_healthy_economy_plan.pdf |url-status=live |archive-url=https://web.archive.org/web/20210810212042/https://www.canada.ca/content/dam/eccc/documents/pdf/climate-change/climate-plan/healthy_environment_healthy_economy_plan.pdf |archive-date=10 August 2021 |access-date=8 August 2021}}

Quebec became the first province to introduce a carbon tax.{{cite web |title=Quebec to collect nation's 1st carbon tax |work=cbc.ca |url=https://www.cbc.ca/news/canada/montreal/quebec-to-collect-nation-s-1st-carbon-tax-1.684888 |url-status=live |archive-url=https://web.archive.org/web/20200930185612/https://www.cbc.ca/news/canada/montreal/story/2007/06/07/carbon-tax.html |archive-date=30 September 2020 |access-date=16 March 2020}}{{cite web |title=Quebec Government to Implement Carbon Tax |url=http://www.torys.com/Publications/Documents/Publication%20PDFs/CCB2007-6.pdf |url-status=dead |archive-url=https://web.archive.org/web/20140812123242/http://www.torys.com/Publications/Documents/Publication%20PDFs/CCB2007-6.pdf |archive-date=12 August 2014}} The tax was to be imposed on energy producers starting 1 October 2007, with revenue collected used for energy-efficiency programs. The tax rate for gasoline is $CDN0.008 per liter, or about {{CA$|3.50}} per tonne of {{chem|CO|2}} equivalent.{{Cite web |title=Where Carbon Is Taxed |url=https://www.carbontax.org/where-carbon-is-taxed/ |url-status=live |archive-url=https://web.archive.org/web/20170223212007/https://www.carbontax.org/where-carbon-is-taxed/ |archive-date=23 February 2017 |access-date=22 February 2017 |website=www.carbontax.org}}

The Liberal government claimed 80% of Canadians were receiving more money back via a carbon rebate but the tax was unpopular with many Canadians and became a political issue.{{Cite web|url=https://www.canada.ca/en/department-finance/news/2024/02/canada-carbon-rebate-amounts-for-2024-25.html|title=Canada Carbon Rebate amounts for 2024-25|first=Department of Finance|last=Canada|date=14 February 2024|website=www.canada.ca}}{{Cite web|url=https://nationalpost.com/news/canada/pbo-carbon-tax-canadians-worse-off-rebates|title=Canadians get more in rebates than they pay in carbon taxes says PBO | National Post}} In 2023, the Official Opposition (Canada) refused to support a free trade bill between Canada and the Ukraine that added a new environmental chapter to "promote carbon pricing."

Liberal Trade Minister Mary Ng stated, “We should applaud the Ukrainians for being able to negotiate an agreement and also fight climate change." Liberal House leader, Karina Gould, argued the Tories were "abandoning Ukraine and not taking climate change seriously" and accused them of "American-style, right-wing politics." Pierre Poilievre, the leader of the Opposition, called the carbon tax stipulation "cruel" and stated, "It is disgusting, that Trudeau’s ideological obsession with taxing working-class people, seniors and suffering families has come ahead of what should have been a free trade agreement."{{Cite web|url=https://globalnews.ca/news/10112455/canada-ukraine-trade-deal-carbon-pricing-poilievre/|title=Carbon pricing mention in updated Ukraine trade deal sparks political spat - National | Globalnews.ca|website=Global News}}

By the end of 2024, opinion polls showed the ruling Trudeau Liberals were 20 points behind the Conservative Party of Canada, which was using the slogan "Axe the Tax" in their platform.{{Cite web|url=https://abacusdata.ca/conservative-open-up-largest-lead-yet/|title=Abacus Data Poll: Conservatives open up their largest lead yet.|first=David|last=Coletto|date=11 April 2024}} Many Liberals, worried about projected losses in the 2025 federal election, pushed for Justin Trudeau to resign, which he eventually announced on January 6, 2025. The Party elected their economic advisor, Mark Carney, and within a few hours of being sworn in as Canada's 24th prime minister on March 14, 2025, Carney signed a declaration ending the consumer carbon tax and the rebate. Carney stated in his platform that "further measures to make up for the lost impact of the consumer carbon tax" would be implemented.{{Cite web|url=https://markcarney.ca/media/2025/01/mark-carney-presents-plan-for-change-on-consumer-carbon-tax|title=Mark Carney presents plan for change on consumer carbon tax|website=English}}{{Cite web|url=https://globalnews.ca/news/11082822/mark-carney-consumer-carbon-price-terminated-immediately/|title=Carney says consumer carbon price ‘eliminated’ immediately | Globalnews.ca|website=Global News}} Alberta Premier Danielle Smith warned of forthcoming increased industrial carbon taxes, which would be passed onto consumers without a rebate program in effect.{{Cite web|url=https://globalnews.ca/news/11083507/danielle-smith-carbon-tax-comments/|title=Premier Smith not sold on killing of consumer carbon tax, wants industrial levy plan | Globalnews.ca|website=Global News}}

{{Further|Climate change in the United States|Greenhouse gas emissions by the United States|Climate change policy of the United States}}

File:Estimated Effect of Carbon Tax in US.png

A national carbon tax in the U.S. has been repeatedly proposed, but never enacted. For instance, on 23 July 2018, Representative Carlos Curbelo (R-FL) introduced H.R. 6463,H.R. 6463 https://www.congress.gov/bill/115th-congress/house-bill/6463 {{Webarchive|url=https://web.archive.org/web/20211120191535/https://www.congress.gov/bill/115th-congress/house-bill/6463|date=20 November 2021}} the "MARKET CHOICE Act", a proposal for a carbon tax in which revenue is used to bolster American infrastructure and environmental solutions.{{Cite web |last=Curbelo |first=Carlos |date=2018-08-16 |title=H.R.6463 - 115th Congress (2017-2018): MARKET CHOICE Act |url=https://www.congress.gov/bill/115th-congress/house-bill/6463 |url-status=live |archive-url=https://web.archive.org/web/20211120191535/https://www.congress.gov/bill/115th-congress/house-bill/6463 |archive-date=20 November 2021 |access-date=2021-10-16 |website=www.congress.gov}} The bill was introduced in the House of Representatives, but did not become law.{{Cite web |last=Curbelo |first=Carlos |date=2018-08-16 |title=Actions - H.R.6463 - 115th Congress (2017-2018): MARKET CHOICE Act |url=https://www.congress.gov/bill/115th-congress/house-bill/6463/actions |url-status=live |archive-url=https://web.archive.org/web/20211017030951/https://www.congress.gov/bill/115th-congress/house-bill/6463/actions |archive-date=17 October 2021 |access-date=2021-10-17 |website=www.congress.gov}}

A number of organizations are currently advancing national carbon tax proposals. To address concerns from conservatives that a carbon tax would grow government and increase cost of living, recent proposals have centered around revenue-neutrality.{{Cite web |date=2019-07-12 |title=Revenue-neutral carbon tax: The climate policy that could appeal to conservatives » Yale Climate Connections |url=http://yaleclimateconnections.org/2019/07/revenue-neutral-carbon-tax-climate-policy/ |url-status=live |archive-url=https://web.archive.org/web/20211019154910/https://yaleclimateconnections.org/2019/07/revenue-neutral-carbon-tax-climate-policy/ |archive-date=19 October 2021 |access-date=2021-10-17 |website=Yale Climate Connections |language=en-US}} The Citizens' Climate Lobby (CCL), republicEn{{Cite web |title=republicEn - Home of the EcoRight |url=https://republicen.org/ |access-date=2023-03-24 |website=republicEn |language=en-US |archive-date=24 March 2023 |archive-url=https://web.archive.org/web/20230324083510/https://republicen.org/ |url-status=live }} (formerly E&EI), the Climate Leadership Council (CLC), and Americans for Carbon Dividends (AFCD) support a revenue-neutral carbon tax with a border adjustment. The latter two organizations advocate for a specific framework called the Baker-Shultz Carbon Dividends Plan, which has gained national bipartisan traction since its announcement in 2017.{{Citation |last=Halstead |first=Ted |title=A climate solution where all sides can win |date=April 2017 |url=https://www.ted.com/talks/ted_halstead_a_climate_solution_where_all_sides_can_win |access-date=2021-10-17 |archive-url=https://web.archive.org/web/20211017030951/https://www.ted.com/talks/ted_halstead_a_climate_solution_where_all_sides_can_win |url-status=live |language=en |archive-date=17 October 2021}}{{Cite web |date=2017-02-08 |title=GOP senior statesmen making push for a carbon tax |url=https://www.foxbusiness.com/markets/gop-senior-statesmen-making-push-for-a-carbon-tax |url-status=live |archive-url=https://web.archive.org/web/20211017030952/https://www.foxbusiness.com/markets/gop-senior-statesmen-making-push-for-a-carbon-tax |archive-date=17 October 2021 |access-date=2021-10-17 |website=Associated Press |language=en-US}} The central principle is a gradually rising carbon tax in which all revenues are rebated as equal dividends to the American people.{{Cite web |date=4 March 2021 |title=The Four Pillars of the Carbon Dividends Plan |url=https://clcouncil.org/our-solution/ |url-status=live |archive-url=https://web.archive.org/web/20211017030954/https://clcouncil.org/our-solution/ |archive-date=17 October 2021 |access-date=2021-10-17 |website=Climate Leadership Council |language=en-US}} This plan is co-authored by (and named after) Republican elder-statesmen James Baker and George Shultz.{{Cite web |date=5 February 2017 |title=The Conservative Case for Carbon Dividends |url=https://clcouncil.org/report/the-conservative-case-carbon-dividends/ |url-status=live |archive-url=https://web.archive.org/web/20211017030954/https://clcouncil.org/report/the-conservative-case-carbon-dividends/ |archive-date=17 October 2021 |access-date=2021-10-17 |website=Climate Leadership Council |language=en-US}} It is also supported by companies including Microsoft, Pepsico, First Solar, American Wind Energy Association, Exxon Mobil, BP, and General Motors.{{Cite web |last=Roberts |first=David |date=22 June 2018 |title=Energy lobbyists have a new PAC to push for a carbon tax. Wait, what? |url=https://www.vox.com/energy-and-environment/2018/6/22/17487488/carbon-tax-dividend-trent-lott-john-breaux |url-status=live |archive-url=https://web.archive.org/web/20201111223306/https://www.vox.com/energy-and-environment/2018/6/22/17487488/carbon-tax-dividend-trent-lott-john-breaux |archive-date=11 November 2020 |access-date=24 August 2019 |website=Vox}}{{Cite web |title=Founding Members |url=https://clcouncil.org/founding-members/ |url-status=live |archive-url=https://web.archive.org/web/20211010193629/https://clcouncil.org/founding-members/ |archive-date=10 October 2021 |access-date=2021-10-10 |website=Climate Leadership Council |language=en-US}}

== See also ==

{{div col|colwidth=30em}}

• Congestion pricing
• Fossil fuel subsidies
• Meat tax
• Polluter pays principle

{{div col end}}

{{Reflist}}

{{Climate change}}

{{Portal bar|Business and economics|Global warming|Ecology|Environment}}

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Category:Environmental tax

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