Adding Quantity Certainty to a Carbon Tax: The Role of a Tax Adjustment Mechanism for Policy Pre-Commitment

Marc Hafstead, Gilbert Metcalf and Roberton Williams

RFF Working Paper Series from Resources for the Future

Abstract: A concern often raised about a carbon tax is that it does not provide any certainty as to the quantity of emission reductions achieved under the policy. We explore in this Issue Brief how greater emission reduction certainty can be built into a carbon tax. We first define a Tax Adjustment Mechanism for Policy Pre-Commitment (TAMPP). A TAMPP is an adjustment mechanism for the tax rate of a carbon tax to ensure that targeted emission reduction milestones are met over the next few decades. We then provide some guidance based on economic principles related to various design considerations that should be incorporated in a cost-effective and politically realistic TAMPP.

Keywords: carbon tax; emissions uncertainty; climate (search for similar items in EconPapers)
JEL-codes: H23 Q50 Q58 (search for similar items in EconPapers)
Date: 2016-10-12
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Citations: View citations in EconPapers (7)

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