Greenhouse gas emissions—foremost carbon dioxide (CO2) but also methane, nitrous oxide, and F-gases—have been driving changes in global temperatures, imposing costs on economic, human, and natural systems. A carbon tax is a form of carbon pricing and, as a market-based approach, it is generally seen as a cost-effective way to reduce greenhouse gas emissions. The tax is levied on the carbon content of fossil fuels. The term can also refer to taxing other types of greenhouse gas emissions, such as methane. A carbon tax puts a price on those emissions to encourage consumers, businesses, and governments to produce less of them.
Amidst bipartisan climate negotiations on Capitol Hill, there have been renewed calls for a carbon tax. Carbon taxes have long been magnets for political controversy. But from an economic standpoint, they deserve to be taken seriously. And as with anything in tax policy, the details and design matter greatly. Federal policy analyst Alex Muresianu recently joined Jesse Solis on The Deduction podcast to talk through the history of climate tax policy, how a pro-growth carbon tax could be designed, and what its chances in DC actually are as the climate crisis worsens.
The economic theory behind such taxes is simple, but transforming the theory into a real-world policy is more challenging. You can learn more about carbon tax basics, the distributional and economic implications of a the tax, and relevant carbon policies and proposals across the globe, including those in Finland and Sweden, which were the first carbon taxes enacted in the world.
While existing carbon taxes are a step towards the right direction in addressing climate change and incentivizing reductions in emissions, there is considerable room for improvement to reach the ideal theoretical carbon tax model.
59 min read
Every policy has trade-offs, but a well-designed carbon tax has the potential to protect the environment without harming consumers, jobs, or businesses.
Our new analysis reviews the basic structure of carbon taxes, how they compare to the existing set of climate policies, and how they could fit into various pro-growth tax reform packages.
26 min read
Implemented in 1991, Sweden’s carbon tax was one of the first in the world. Since then, Sweden’s carbon emissions have been declining, while there has been steady economic growth. Today, Sweden levies the highest carbon tax rate in the world and its carbon tax revenues have been decreasing slightly over the last decade.
21 min read
Amidst bipartisan climate negotiations on Capitol Hill, there have been renewed calls for a carbon tax. Carbon taxes have long been magnets for political controversy. But from an economic standpoint, they deserve to be taken seriously. Here’s why.
The Inflation Reduction Act created numerous tax subsidy programs intended to accelerate the transition to a greener economy.
8 min read
What do election results mean for the future of the federal tax code? What role will tax policy play in curbing the economic effects of the COVID-19 pandemic? How should policymakers address the federal deficit and could a carbon tax be part of that solution? How much of President-elect Joe Biden’s pre-election tax plan will actually come to pass?
17 European countries have implemented a carbon tax, ranging from less than €1 per metric ton of carbon emissions in Ukraine and Poland to over €100 in Sweden.
3 min read
Making the Tax Cuts and Jobs Act’s individual provisions permanent combined with a carbon tax can be a revenue-neutral trade and increase the long-run size of the economy by 1 percent, making it a sustainable pro-growth option.
23 min read
A recent OECD report on 2020 tax reforms reveals an increase in the number of environmentally-related tax policies, including gas taxes, carbon taxes, and taxes on electricity consumption.
5 min read
Implemented in 1991, Sweden’s carbon tax was one of the first in the world. Since then, Sweden’s carbon emissions have been declining, while there has been steady economic growth. Today, Sweden levies the highest carbon tax rate in the world and its carbon tax revenues have been decreasing slightly over the last decade.
21 min read
Alesina’s work suggests that raising taxes to reduce the federal deficit and national debt would be an economic mistake. The less economically damaging path is to cut spending, what some have called austerity policies.
3 min read
In our new report, we explore the design implications of a carbon tax and provide estimates for revenue, economic, and distributional effects of three potential carbon tax and revenue recycling proposals. Each proposal faces different trade-offs and achieves different policy goals.
23 min read
Ballot initiatives are often an afterthought on Election Day, but in many states, voters went to the polls to weigh in on significant tax policy questions. Here are the most recent results we’ve compiled for tax-related ballot measures.
5 min read
Explore our list of the top state tax ballot measures to watch for throughout the country.
11 min read
