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A Tax–Based Approach to Slowing Global Climate Change

Aldy, Joseph E., Ley, Eduardo, and Parry, Ian

Abstract:

This paper discusses the design of CO2 taxes at the domestic and international level and the choice of taxes versus cap and trade. There is a strong case 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.

Citation

Aldy, Joseph E., Ley, Eduardo, and Parry, Ian (2008), A Tax–Based Approach to Slowing Global Climate Change, National Tax Journal, 61:3, pp. 493-517

DOI: dx.doi.org/10.17310/ntj.2008.3.09