A Tax-Based Approach to Slowing Global Climate Change

Joseph E. Aldy, Eduardo Ley, Ian W. H. Parry
2008 Social Science Research Network  
J o s e p h E . A l d y , E d u a r d o L e y , a n d I a n W . H . P a r r y Abstract In this paper, we discuss the design of carbon dioxide (CO 2 ) taxes at the domestic and international level and the choice of taxes versus a cap-and-trade system. A strong case can be made for taxes on uncertainty, fiscal, and distributional grounds, though this critically hinges on policy specifics and how revenues are used. The efficient near-term tax is at least $5-$20 per ton of CO 2 and the tax should
more » ... nd the tax should be imposed upstream with incentives for downstream sequestration and abatement of other greenhouse gases. At the international level, a key challenge is the possibility that emissions taxes might be undermined through offsetting changes in other energy policies.
doi:10.2139/ssrn.1238943 fatcat:pnupvr4ydvcadgin2rb2u6zil4