Editing IPCC:AR6/WGIII/Chapter-13 (section)

==== 13.6.3.1 Carbon Taxes ====

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A carbon tax is a charge on carbon dioxide or other greenhouse gases imposed on specified emitters or products. In practice features such as exemptions and multiple rates can lead to debate as to whether a specific tax is a carbon tax ( [[#Haites--2018|Haites 2018]] ). While other taxes can also reduce emissions by increasing the price of GHG emitting products, the result may be inefficient unless the tax rate is proportional to the emissions intensity. a tax on value of fossil fuels, for example, could raise the price on natural gas more than the price of coal, and hence increase emissions if the resulting substitution towards coal were to outweigh reductions in energy use.

As of April 2021, 27 carbon taxes had been implemented by national governments, mostly in Europe ( [[#World%20Bank--2021a|World Bank 2021a]] ). Most of the taxes apply to fossil fuels used for transportation and heating and cover between 3% and 79% of the jurisdiction’s emissions. Several countries also tax F-gases. Tax rates vary widely from less than USD1 to over USD137 per tCO 2 -eq. a few jurisdictions lowered existing fuel taxes when they implemented the carbon tax, thus reducing the effective tax rate ( [[#OECD--2021a|OECD 2021a]] ). How the tax revenue is used varies widely by jurisdiction.

Carbon taxes tend to garner the least public support among possible mitigation policy options ( [[#Rhodes--2017|Rhodes et al. 2017]] ; [[#Rabe--2018|Rabe 2018]] ; [[#Maestre-Andrés--2019|Maestre-Andrés et al. 2019]] ; [[#Criqui--2019|Criqui et al. 2019]] ) although some regulations also meet with opposition ( [[#Attari--2009|Attari et al. 2009]] ). Policymakers sometimes use the revenue to build support for the tax, allocating some to address regressivity, to address competitiveness claims by industry, to reduce the economic cost by lowering existing taxes, and to fund environmental projects ( [[#Gavard--2018|Gavard et al. 2018]] ; [[#Klenert--2018|Klenert et al. 2018]] ; [[#Levi--2020|Levi et al. 2020]] ).

Carbon tax rates can be adjusted for inflation, increases in income, the effects of technological change, changing policy ambition, or the addition or subtraction of other policies. In practice, numerous jurisdictions have not increased their tax rates annually and some scheduled tax increases have not been implemented ( [[#Haites--2018|Haites et al. 2018]] ). Predictability of future tax rates helps improve economic performance ( [[#Bosetti--2011|Bosetti and Victor 2011]] ; [[#Brunner--2012|Brunner et al. 2012]] ). Uncertainty about the future existence of a carbon price can hinder investment ( [[#Jotzo--2012|Jotzo et al. 2012]] ) and uncertainty about future price levels can increase the resource costs of carbon pricing ( [[#Aldy--2020|Aldy and Armitage 2020]] ).

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