Taxing Energy Use and Carbon Emissions to Reduce Global CO2 Levels

Karen Thierfelder (), Scott McDonald and Sherman Robinson
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Karen Thierfelder: United States Naval Academy
Scott McDonald: Humboldt University

Departmental Working Papers from United States Naval Academy Department of Economics

Abstract: The purpose of this paper is to analyze the effect energy taxes have on CO2 emissions. The paper describes a short run response to current demands for mitigation, working through the price system to change behavior and using instruments currently available to governments. Other policy options such as changes to technology or the establishment of a market for carbon permits (i.e. cap and trade schemes) will take time to develop. This paper shows the implications of using either a sales tax on energy commodities or a tax on carbon to achieve mitigation objectives. A tax on carbon is more efficient than a tax on fossil fuels and requires less adjustment in terms of real GDP. The analysis also addresses the role of developing countries, finding that they can be exempt from tax changes with little effect on global CO2 emissions.

Pages: 33 pages
Date: 2021-01
New Economics Papers: this item is included in nep-ene and nep-env
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