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Maximum Carbon Taxes in the Short Run

Author

Listed:
  • Richard Tol

    (Department of Economics, University of Sussex, Institute for Environmental Studies and Department of Spatial Economics, Vrije Universiteit, Amsterdam)

Abstract

A cap is imposed on the carbon tax rate if the total tax revenue is not allowed to increase. Using recent data on the carbon-intensity of the economy and the overall tax take, I show that this cap constrains almost any climate policy in at least some countries. A larger number of countries, emitting a substantial share of global carbon dioxide, cannot fully participate if the carbon tax (or equivalent alternative regulation) is high enough to meet the 2ºC target. For that target, the carbon tax revenue in 2020 is greater than 10% of total tax revenue in every country.

Suggested Citation

  • Richard Tol, 2012. "Maximum Carbon Taxes in the Short Run," Working Paper Series 3312, Department of Economics, University of Sussex.
  • Handle: RePEc:sus:susewp:3312
    as

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    File URL: http://www.sussex.ac.uk/economics/documents/wps33-2012-tol.pdf
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    References listed on IDEAS

    as
    1. Romero-Ávila, Diego, 2008. "Convergence in carbon dioxide emissions among industrialised countries revisited," Energy Economics, Elsevier, vol. 30(5), pages 2265-2282, September.
    2. Liddle, Brantley, 2010. "Revisiting world energy intensity convergence for regional differences," Applied Energy, Elsevier, vol. 87(10), pages 3218-3225, October.
    3. Robert Ayres & Jörg Walter, 1991. "The greenhouse effect: Damages, costs and abatement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(3), pages 237-270, September.
    4. Ackerman, Frank & Stanton, Elizabeth A. & Bueno, Ramón, 2010. "Fat tails, exponents, extreme uncertainty: Simulating catastrophe in DICE," Ecological Economics, Elsevier, vol. 69(8), pages 1657-1665, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. ‘Revenue-Neutral’ Carbon Tax: Merely Implausible or Mathematically Impossible?
      by jneeley in MasterResource on 2012-08-16 11:00:10

    More about this item

    Keywords

    climate policy; carbon tax; target setting;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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