Skip to content

Carbon Taxes

Greenhouse gas emissions—foremost carbon dioxide (CO2) but also methane, nitrous oxide, and F-gases—have been driving changes in global temperatures, imposing costs on economic, human, and natural systems. A carbon tax is a form of carbon pricing and, as a market-based approach, it is generally seen as a cost-effective way to reduce greenhouse gas emissions. The tax is levied on the carbon content of fossil fuels. The term can also refer to taxing other types of greenhouse gas emissions, such as methane. A carbon tax puts a price on those emissions to encourage consumers, businesses, and governments to produce less of them.

Amidst bipartisan climate negotiations on Capitol Hill, there have been renewed calls for a carbon tax. Carbon taxes have long been magnets for political controversy. But from an economic standpoint, they deserve to be taken seriously. And as with anything in tax policy, the details and design matter greatly. Federal policy analyst Alex Muresianu recently joined Jesse Solis on The Deduction podcast to talk through the history of climate tax policy, how a pro-growth carbon tax could be designed, and what its chances in DC actually are as the climate crisis worsens.

The economic theory behind such taxes is simple, but transforming the theory into a real-world policy is more challenging. You can learn more about carbon tax basics, the distributional and economic implications of a the tax, and relevant carbon policies and proposals across the globe, including those in Finland and Sweden, which were the first carbon taxes enacted in the world.

All Related Articles

2023 carbon tax rates in Europe and other information related to carbon taxes in Europe

Carbon Taxes in Europe

In recent years, several countries have taken measures to reduce carbon emissions, including instituting environmental regulations, emissions trading systems, and carbon taxes. In 1990, Finland was the world’s first country to introduce a carbon tax.

carbon tariff and carbon border tax proposed in Prove It Act by Sens. Kevin Cramer (R-ND) and Christopher Coons (D-DE)

What Would a Carbon Tariff Achieve?

Sens. Kevin Cramer (R-ND) and Christopher Coons (D-DE) have recently introduced a bill laying the groundwork for a possible solution to the problem: a tax on the carbon content of imports. But it falls short of the optimal approach in several ways.

Inflation Reduction Act green energy tax credits including clean vehicle credit and clean electricity tax credit

Tax Ideas for the EU Green Transition

The past few years have brought a renewed push from countries across the globe to combat climate change. In the European Union, policymakers have put a timeline on their climate agenda. By 2050, the EU wants to achieve a net-zero economy. Sean Bray, director of European policy, breaks down how much it would cost to achieve this goal.

Carbon Taxes in Theory and Practice including US carbon tax case studies with British Columbia Canada carbon tax, UK carbon tax, and Sweden carbon tax revenue recycling reforms

Carbon Taxes in Theory and Practice

In our latest report, we consider several theoretical arguments for carbon taxes and the evidence from carbon taxes implemented around the world related to emissions, economic growth, distribution and revenue recycling options, other environmental taxes, green subsidies, and environmental regulations.

What the EU Carbon Border Adjustment Mechanism Means for Europe and the United States EU CBAM or EU carbon border tax

What the EU’s Carbon Border Adjustment Mechanism Means for Europe and the United States

The Carbon Border Adjustment Mechanism (CBAM) is a key aspect of the EU’s broader Fit for 55 package which aims to cut 55 percent of net greenhouse gas (GHG) emissions in the EU by 2030. The growing number of competing climate policies between the EU and U.S., such as tax provisions in the Inflation Reduction Act, could present policymakers on both sides of the Atlantic an opportunity to work together.

unlocking global growth and role of taxation in promoting economic growth Tax Conference

How to Unlock Global Growth: The Role of Taxation

Our recent policy conference brought together academics and political leaders to present research on some of the most pressing issues in global tax policy and to discuss solutions that can unlock genuine global growth.