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Carbon tax needs thresholds to reach its full potential

Nature Climate Change volume 3, pages 1008–1011 (2013)Cite this article

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The political opportunities for implementing a carbon tax high enough to induce large emission cuts will be better if at first the tax is charged on the difference between emissions and fixed thresholds, rather than on all emissions as is now practised.

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Figure 1: A simplified illustration of how free carbon can enable a higher carbon price without increasing revenue.
Figure 2
Figure 3: Past and potential future carbon price revenues, as shares of central government tax revenue.

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Acknowledgements

We thank F. Convery, M. Grubb, S. Hatfield-Dodds, A. Morris, T. Sterner and D. Victor for helpful comments, and C. Hilliker for technical assistance with the figures.

Author information

Authors and Affiliations

  1. Fenner School of Environment and Society, Australian National University, Canberra, 0200, Australian Capital Territory, Australia

    John C. V. Pezzey

  2. Crawford School of Public Policy, Australian National University, Canberra, 0200, Australian Capital Territory, Australia

    Frank Jotzo

  3. Centre for European Economic Research, Mannheim, 68161, Germany

    Frank Jotzo

Authors
  1. John C. V. Pezzey
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  2. Frank Jotzo
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Corresponding author

Correspondence to John C. V. Pezzey.

Supplementary information

Supplementary Information

Free carbon design issues that apply symmetrically to a tax and to trading (PDF 1471 kb)

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Pezzey, J., Jotzo, F. Carbon tax needs thresholds to reach its full potential. Nature Clim Change 3, 1008–1011 (2013). https://doi.org/10.1038/nclimate2054

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