Publication Date
2009
Publication Title
Public Law & Legal Theory
Abstract
We consider the design of a tax on greenhouse gas emissions for a developed country such as the United States. We consider three sets of issues: the optimal tax base, issues relating to the rate (including the use of the revenues and rate changes over time) and trade. We show that a well-designed carbon tax can capture about 80% of U.S. emissions by taxing fewer than 3,000 taxpayers and up to almost 90% with a modest additional cost. We recommend full or partial delegation of rate setting authority to an agency to ensure that rates reflect new information about the costs of carbon emissions and of abatement. Adjustments should be made to the income tax to ensure that a carbon tax is revenue neutral and distributionally neutral. Finally, we propose an origin-based system for trade with countries that have an adequate carbon tax and a system of border taxes for imports from countries without a carbon tax. We suggest a system that imposes presumptive border tax adjustments with the ability of an individual firm to prove that a different rate should apply. The presumptive tax could be based either on average emissions for production of the item by the exporting country or by the importing country.
Number
254
Recommended Citation
Gilbert E. Metcalf & David A. Weisbach, "The Design of a Carbon Tax" (University of Chicago Public Law & Legal Theory Working Paper No. 254, 2009).
Additional Information
Chicago Unbound includes both works in progress and final versions of articles. Please be aware that a more recent version of this article may be available on Chicago Unbound, SSRN or elsewhere.