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Geroe I 6
Carbon Taxation/ETR/Effective Tax Rate/Government Policy/Geroe: The major categories of carbon tax revenue use in ETR [effective tax rate] have been to reduce other taxes, to support environmental projects, and to provide compensation. Nonetheless, the most common definition of ETR (from the 1990s to 2006) has been the use of environmental taxes to reduce other taxes. The main focus has been on taxes on labor, although other regressive indirect taxes imposed on the cost of goods and services can also be reduced (Clinch, Dunne, & Dresner, 2006)(1). Thus, ETR has long incorporated an aspect of distributional neutrality, in terms of reducing the regressive effects of taxes impacting disproportionately on lower income households. Recycling carbon tax revenue to fund reductions in other taxes can also reduce impacts on international competitiveness, thus ameliorating carbon leakage in terms of shifting of production to jurisdictions without a carbon price (Barker & Johnstone, 1998)(2). A central element of this debate has been discussion of the ‘‘double dividend’’ of ETR, through combining emissions reductions with stimulation of employment through reductions in labor taxes or economic demand through reductions in income taxes. In the early 1990s, these issues were considered in several government sponsored Scandinavian studies and by EU in relation to its 1992 carbon tax proposal (Clinch et al., 2006)(1). In the late 1990s, O’Riordan (1997)(3) surveyed the economic modeling and theoretical argument on ETR and concluded that they ‘‘. . . do not tell us any more than that we ought to be very careful about reaching premature cost decisions on the economic efficiency of such taxes’’.
Two decades later, the variety of industrial and policy contexts in which carbon taxes have been introduced continues to render evaluation of specific measures in isolation problematic. All carbon taxes have been designed and integrated into the tax mix to capture economic and social equity as well as environmental objectives. Hence, evaluation of carbon taxes necessarily relates to the diverse public policy objectives of the implementation context.



1. Clinch, P., Dunne, L., & Dresner, S. (2006). Environmental and wider implications of political impediments to environmental tax reform. Energy Policy, 34, 960.
2. Barker, T., & Johnstone, N. (1998). International competitiveness and carbon taxation. In T. Barker & J. Kohler (Eds.), International competitiveness and environmental policies. Cheltenham, England: Edward Elgar Publishing.
3. O’Riordan, T. (1997). Editorial introduction. In T. O’Riordan (Ed.), Ecotaxation. London, England: Earthscan Publications.


Steven Geroe, 2019: “Addressing Climate Change Through a Low-Cost, High-Impact Carbon Tax”. In: Journal of Environment & Development, Vol. 28/1, pp. 3-27.


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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution.
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Government Policy
Geroe I
Steven Geroe
Addressing Climate Change Through a Low-Cost, High-Impact Carbon Tax 2019


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