The Design of a Carbon Tax

Gilbert Metcalf () and David Weisbach

No 727, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: We consider the design of a tax on greenhouse gas emissions for a developed country such as the United States. We consider three sets of issues: the optimal tax base, issues relating to the rate (including the use of the revenues and rate changes over time) and trade. We show that a well-designed carbon tax can capture about 80% of U.S. emissions by taxing fewer than 3,000 taxpayers and up to almost 90% with a modest additional cost. We recommend full or partial delegation of rate setting authority to an agency to ensure that rates reflect new information about the costs of carbon emmissions and of abatement. Adjustments should be made to the income tax to ensure that a carbon tax is revenue neutral and distributionally neutral. Finally, we propose an origin-based system for trades with countries that have an adequate carbon tax. We suggest a system that imposes presumptive border tax adjustments with the ability of an individual firm to prove that a different rate should apply. The presumptive tax could be based either on average emissions for production of the item by the exporting country or by the importing country.

Date: 2008
View list of references View citations in EconPapers

Downloads: (external link)
http://ase.tufts.edu/econ/research/documents/2008/metcalfCarbonTax.pdf (application/pdf)

Related works:
Working Paper: The Design of a Carbon Tax (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:tuf:tuftec:0727

Access Statistics for this paper

More papers in Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University
Address: Medford, MA 02155, USA
Series data maintained by Caroline Kalogeropoulos ().