Carbon Taxes: What do They Look Like and What Can We Expect?

By Liam BeriganPublished April 14, 2014

With the release of the most recent report from the IPCC, climate change is proving to be a major concern. Carbon dioxide emissions have been consistently increasing and this trend will only continue. Policymakers should implement carbon taxes, modeled on British Columbia's version, to mitigate greenhouse gas emissions.

However, a well-conceived carbon tax system can be poorly implemented, as seen in Australia. In July 2012, Australia introduced a carbon tax of $25 per ton of carbon dioxide on its largest emitters, which prompted severe political resistance. The tax was intended to compensate homeowners for increases in costs of living and serve as a precursor for a planned cap-and-trade program. Nonetheless, there have been continual attempts by the Australian government to repeal the carbon tax, which has fueled national and international cynicism about carbon taxes. Many critics have railed against the Australian carbon tax for being far too expensive and hindering economic growth. Additionally, only about half of the revenue generated from carbon taxes was returned to taxpayers, which have minimized future spending and investment in other sectors of the Australian economy.

If implemented well, carbon taxes are excellent policy mechanisms for minimizing carbon emissions. They can provide smooth transitions to cap-and-trade programs and avoid exerting pressure on domestic economies. To facilitate major carbon reductions, countries should experiment with carbon taxes.