Table of Contents

Carbon Pricing

Carbon Pricing

Design, Experiences and Issues

Critical Issues in Environmental Taxation series

Edited by Larry Kreiser, Mikael S. Andersen, Birgitte E. Olsen, Stefan Speck, Janet E. Milne and Hope Ashiabor

Carbon Pricing reflects upon and further develops the ongoing and worthwhile global debate into how to design carbon pricing, and how to utilize the financial proceeds in the best possible way for society. The world has recently witnessed a significant downward adjustment in fossil fuel prices, which has negative implications for the future of our environment. In light of these negative developments, it is important to understand the benefits of environmental sustainability through well-documented research. This discerning book considers the design of carbon taxes and examines the consequential outcomes of different taxation compositions as regulatory instruments. Expert contributors assess a variety of national experiences to provide an empirical insight into the use of carbon taxes, emissions trading, energy taxes and excise taxes. The overarching discussion concludes that successful policies used by some countries can be implemented in other jurisdictions with minimum new research and experimentation.

Chapter 7: Carbon tariffs and developing countries: the case for special and differential treatment

Selina Cheng and Bill Butcher

Subjects: economics and finance, economics of innovation, environment, energy policy and regulation, environmental law, law - academic, environmental law, tax law and fiscal policy, politics and public policy, environmental politics and policy


Economic instruments, including environmental taxes, have long been considered an effective and cost-efficient means of achieving lower carbon emissions. However, environmental taxes raise two prominent concerns: first, that they will lower international competitiveness for a taxing country’s exports and second that they will lead to ‘carbon leakage’, whereby producers will relocate to non-taxing countries. These concerns can be addressed, at least in part, by the imposition of border adjustment measures (BAMs), which create a more level playing field by imposing on imports from countries without a comparable environmental impost a charge (known as a ‘carbon tariff’) equivalent to the environmental tax imposed on domestic products; and by exempting exports from the tax. The prospect of carbon tariffs will raise concerns among countries without comparable carbon pricing mechanisms, whose exports will be the potential objects of such tariffs. Indeed, one of the objectives of carbon tariffs is to incentivize the introduction of carbon pricing regulation in non-taxing countries. Particularly concerned will be producers and governments from developing countries, whose economies could be especially challenged by any imposition of carbon tariffs on their products. The issues around carbon tariffs and developing countries have been brought into sharper focus by the recent United States–China agreement to limit carbon emissions.

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