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Research report

Tax Policy Issues in Designing a Carbon Tax

Donald Marron, Eric Toder
May 27, 2014
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Abstract

A carbon tax is a promising tool for discouraging the greenhouse gas emissions that cause climate change. In principle, a well-designed tax could reduce the risk of climate change, minimize the cost of emissions reductions, encourage innovation in low-carbon technologies, and raise new public revenue. But designing a real-world carbon tax poses significant challenges. We analyze those challenges from a public finance perspective, emphasizing three tax policy design issues: setting the tax rate, collecting the tax, and using the resulting revenue. The benefits of a carbon tax will depend on how policymakers address those issues.
Copyright American Economic Association; reproduced with permission of the American Economic Review.

Research Area

Business Taxes Energy/environmental tax Federal Budget and Economy Economic effects of tax policy Federal revenue
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Meet the Experts

  • Donald Marron
    Institute Fellow
  • Eric Toder
    Institute Fellow
Research report

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March 30, 2022
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