Carbon taxes are often fiscal and not climate policies
Carbon taxing is a policy instrument that is implemented in increasingly many countries – but its effectiveness in reducing emissions has been low so far. One reason is that the tax has often been too low to affect emissions. In a paper in One Earth, we investigate the reasons for why governments implement such low carbon taxes although they can know that they will not be effective emission reduction tools. We show that in most cases of low carbon tax implementation, the main rationale was not to reduce emissions but fiscal, seeking to raise state income for the general budget or for specific uses. Over time, several countries changed the rationale and increased the carbon tax. Our findings suggest that having a carbon tax does not much: it is important to look at the design and rationale of the tax to understand whether it is in fact a climate policy or rather a fiscal policy.
Link to the article: https://www.cell.com/one-earth/fulltext/S2590-3322(25)00216-7