IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/14908.html
   My bibliography  Save this book chapter

Carbon Taxes: Many Strengths but Key Weaknesses

In: Tax Policy and the Economy, Volume 38

Author

Listed:
  • Roger Gordon

Abstract

There is a consensus among economists that a carbon tax is the best approach for addressing the effects of CO2 emissions on the global climate. However, past international agreements on climate change instead specify caps on emissions (a quantity target) for each country. This paper explores several advantages of such use of quantity targets. For one, if a country were to impose a carbon tax at a rate high enough to correct for global externalities, this rate would far exceed the rate in that country’s own self-interest. The result is an incentive to make use of other domestic government policies to encourage greater emissions, undercutting the intended abatement under a carbon tax. A quantity target instead by construction caps emissions. Second, the paper argues that a quantity target can better insure that global warming remains below two degrees Celsius, given the uncertainties faced regarding the response to any given carbon tax rate. Third, the set of quantity targets set for each country can more flexibly be adjusted to ensure that most countries benefit from participating in a global accord, while still allowing efficient patterns of abatement by giving countries credit for cross-border abatement efforts.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Roger Gordon, 2023. "Carbon Taxes: Many Strengths but Key Weaknesses," NBER Chapters, in: Tax Policy and the Economy, Volume 38, pages 1-24, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14908
    as

    Download full text from publisher

    File URL: https://www.nber.org/chapters/c14908.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Laurence Kotlikoff & Felix Kubler & Andrey Polbin & Jeffrey Sachs & Simon Scheidegger, 2021. "Making Carbon Taxation A Generational Win Win," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 3-46, February.
    2. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, vol. 71(2), pages 165-188, February.
    3. Louis Kaplow & Steven Shavell, 2002. "On the Superiority of Corrective Taxes to Quantity Regulation," American Law and Economics Review, American Law and Economics Association, vol. 4(1), pages 1-17, January.
    4. Yongyang Cai & Kenneth L. Judd & Thomas S. Lontzek, 2013. "The Social Cost of Stochastic and Irreversible Climate Change," NBER Working Papers 18704, National Bureau of Economic Research, Inc.
    5. Bergstrom, Ted & Blomquist, Soren, 1996. "The political economy of subsidized day care," European Journal of Political Economy, Elsevier, vol. 12(3), pages 443-457, November.
    6. William Nordhaus, 2019. "Climate Change: The Ultimate Challenge for Economics," American Economic Review, American Economic Association, vol. 109(6), pages 1991-2014, June.
    7. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    8. Bergstrom, Ted & Blomquist, Soren, 1996. "The political economy of subsidized day care," European Journal of Political Economy, Elsevier, vol. 12(3), pages 443-457, November.
    9. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
    10. By Louis Kaplow, 2012. "Optimal Control Of Externalities In The Presence Of Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 487-509, May.
    11. William D. Nordhaus, 2006. "After Kyoto: Alternative Mechanisms to Control Global Warming," American Economic Review, American Economic Association, vol. 96(2), pages 31-34, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    2. Bas Jacobs, 2013. "Optimal redistributive tax and education policies in general equilibrium," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 312-337, April.
    3. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 147-174, Fall.
    4. Saez, Emmanuel, 2004. "Direct or indirect tax instruments for redistribution: short-run versus long-run," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 503-518, March.
    5. Jukka Pirttilä & Håkan Selin, 2011. "Tax Policy and Employment: How Does the Swedish System Fare," Working Papers 267, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    6. Johann K. Brunner, 2003. "Optimale direkte und indirekte Steuern bei unterschiedlicher Anfangsausstattung," Economics working papers 2003-10, Department of Economics, Johannes Kepler University Linz, Austria.
    7. Sören Blömquist & Vidar Christiansen, 1998. "Price Subsidies Versus Public Provision," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 283-306, July.
    8. Boadway, Robin & Gahvari, Firouz, 2006. "Optimal taxation with consumption time as a leisure or labor substitute," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1851-1878, November.
    9. Jan Eeckhout & Chunyang Fu & Wenjian Li & Xi Weng, 2021. "Optimal taxation and market power," Economics Working Papers 1777, Department of Economics and Business, Universitat Pompeu Fabra.
    10. Griffith, Rachel & O’Connell, Martin & Smith, Kate, 2019. "Tax design in the alcohol market," Journal of Public Economics, Elsevier, vol. 172(C), pages 20-35.
    11. John T. Revesz, 2014. "A computational model of optimal commodity taxation," Public Finance Research Papers 4, Istituto di Economia e Finanza, DSGE, Sapienza University of Rome.
    12. Feger, Fabian & Radulescu, Doina, 2020. "When environmental and redistribution concerns collide: The case of electricity pricing," Energy Economics, Elsevier, vol. 90(C).
    13. Dan Anderberg, 2007. "Inefficient households and the mix of government spending," Public Choice, Springer, vol. 131(1), pages 127-140, April.
    14. Louis Kaplow, 2010. "Optimal Control of Externalities in the Presence of Income Taxation," STICERD - Public Economics Programme Discussion Papers 02, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    15. Findeisen, Sebastian & Sachs, Dominik, 2014. "Efficient Labor and Capital Income Taxation over the Life Cycle," Working Papers 14-17, University of Mannheim, Department of Economics.
    16. Lars Håkonsen & Trond Erik Lunder, 2015. "Matching versus General Grants: Local Government Response to Child-Care Subsidies," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(3), pages 299-327, September.
    17. Findeisen, Sebastian & Sachs, Dominik, 2017. "Redistribution and insurance with simple tax instruments," Journal of Public Economics, Elsevier, vol. 146(C), pages 58-78.
    18. Marc Fleurbaey & Ulrike Kornek, 2021. "When redistribution makes personalized pricing of externalities useless," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(2), pages 363-375, April.
    19. Hummel, Albert Jan & Ziesemer, Vinzenz, 2023. "Food subsidies in general equilibrium," Journal of Public Economics, Elsevier, vol. 222(C).
    20. Arnaud Costinot & Iván Werning, 2023. "Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2261-2291.

    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:14908. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.