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Using the Tax System to Address Competition Issues With a Carbon Tax

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  • Gilbert E. Metcalf

Abstract

This paper considers how tax reductions financed by a carbon tax could be designed to mitigate the need for specific relief for firms in select energy-intensive, trade-exposed (EITE) sectors at the six-digit North American Industry Classification System level. Providing an output-based tax credit to EITE sectors or a broad based reduction in corporate income tax rates disproportionately benefits EITE sectors, thereby potentially reducing pressure for other transitional relief. Payroll tax reductions, on the other hand, do not disproportionately benefit EITE sectors given their higher than average capital intensity.

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  • Gilbert E. Metcalf, 2014. "Using the Tax System to Address Competition Issues With a Carbon Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(4), pages 779-806, December.
    • Handle: RePEc:ntj:journl:v:67:y:2014:i:4:p:779-806
    DOI: 10.17310/ntj.2014.4.02
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    Cited by:

    1. Laurence Kotlikoff & Felix Kubler & Andrey Polbin & Jeffrey Sachs & Simon Scheidegger, 2021. "Making Carbon Taxation A Generational Win Win," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 3-46, February.
    2. Charles E. McLure Jr., 2014. "Selected International Aspects of Carbon Taxation," American Economic Review, American Economic Association, vol. 104(5), pages 552-556, May.
    3. Adrien Vogt‐Schilb & Stephane Hallegatte, 2017. "Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 6(6), November.
    4. Christoph Böhringer & Brita Bye & Taran Fæhn & Knut Einar Rosendahl, 2017. "Output-based rebating of carbon taxes in a neighbour's backyard: Competitiveness, leakage and welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 50(2), pages 426-455, May.
    5. Gilbert E. Metcalf, 2014. "Using the Tax System to Address Competition Issues With a Carbon Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(4), pages 779-806, December.
    6. Laurence J. Kotlikoff & Andrey V. ZUBAREV & Andrey POLBIN, 2021. "Will the Paris accord accelerate climate change [Ускоряет Ли Парижское Соглашение Изменение Климата?]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 8-37, February.
    7. Rozenberg, Julie & Vogt-Schilb, Adrien & Hallegatte, Stephane, 2020. "Instrument choice and stranded assets in the transition to clean capital," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    8. Disna Sajeewani & Mahinda Siriwardana & Judith Mcneill, 2015. "Household Distributional And Revenue Recycling Effects Of The Carbon Price In Australia," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 1-23.
    9. Donald B. Marron & Eric J. Toder, 2014. "Tax Policy Issues in Designing a Carbon Tax," American Economic Review, American Economic Association, vol. 104(5), pages 563-568, May.
    10. Mathur, Aparna & Morris, Adele C., 2014. "Distributional effects of a carbon tax in broader U.S. fiscal reform," Energy Policy, Elsevier, vol. 66(C), pages 326-334.

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    More about this item

    JEL classification:

    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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