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AUTHOR: Jan L. Vernon
DATE: March 1992

The first in this new series of Perspectives from IEA Coal Research presents the facts on carbon taxes clearly and concisely in 14 pages.

Carbon taxes are taxes levied on emissions of carbon dioxide (CO2) into the atmosphere in order to discourage such emissions. Carbon dioxide constitutes over half of man-made greenhouse gas emissions and is therefore potentially a major contributor to global climatic change.

Without action, energy-related CO2 emissions from OECD countries will be 20% above current levels by the year 2000 and worldwide emissions will be 50% higher. Many countries have set targets to stabilse CO2 emissions at current levels or reduce them. Whilst carbon taxes are seen as one method of achieving these targets they have been subject to considerable criticism. This criticism focuses on three main areas:

  • the potential to increase industry's cost;
  • the potential to lead to distortions in trade;
  • their adverse social effects.

Perspectives sets out the current position with respect to carbon taxes in OECD countries. For the carbon taxes in place in Finland, the Netherlands, Norway and Sweden, the report summarises the:

  • CO2 target;
  • date of introduction of carbon tax;
  • objective;
  • energy sources covered;
  • tax basis;
  • tax rates payable on energy sources;
  • concessions/exemptions;
  • revenue;
  • impact on fuel prices;
  • other energy taxes.

The report continues by reviewing plans for carbon taxes in a further nine countries and also the proposed European Communities tax. A concluding chapter summarises:

  • the effectiveness of carbon taxes;
  • their impact on coal use;
  • their wider economic impacts;
  • the potential for global carbon taxes.