Carbon Taxes

Brief article review

Carbon taxes: a review of experience and policy

design considerations

Introduction

Carbon taxes are fairly new in the USA compare to European countries. For example in Finland this tax was adopted in 1990. Other countries which implemented carbon taxes are: Netherlands, Sweden, Denmark, Norway and the UK. In 2009 federal interest towards carbon taxes increased in the USA. “The US House of Representatives passed H.R.2454 ‘The American Clean Energy and Security Act of 2009’ (the ‘Waxman–Markey Bill’) in June 2009, and the US Senate introduced S.1733 ‘Clean Energy Jobs and American Power Act’ (the ‘Kerry–Boxer Bill’) in September 2009. While recent federal policy has focused on carbon cap and trade policies, Congress introduced three carbon tax bills in 2009.Proposals vary but all of them tax fossil fuel production and imports between $10 and $15 per short ton of carbon dioxide (CO2) in the first year, and create plans to increase the tax over time” (SUMNER, J., BIRD, L., & DOBOS, H. (2011). Authors of this article analyze existing carbon tax policies and design considerations (where to set tax rate, which sectors to tax and most importantly how to use tax revenue).

Carbon tax design considerations

Tax base:

Government must decide what exactly it’s taxing. In some countries carbon tax placed on coal, natural gas and coal. Some governments exclude certain industries from this tax or lower their tax liability. Also, decision needs to be made whether to tax upstream (exploration and production sector) or downstream (includes all work done at the refinery, distillation, cracking, reforming, blending storage, mixing and shipping) sources of emissions.

Tax rates:

Carbon tax rates vary in different countries. In my opinion European tax rates are really high. Example will be the Norwegian government...