Carbon Tax - Harmonized Carbon Taxes

Harmonized Carbon Taxes

Cooper (1998, 2001) has been a leading proponent of a harmonized carbon tax (a tax where the country setting the tax keeps all the revenues). Under his proposals, all participating nations would be subject to a tax at a common rate, thus achieving cost-effectiveness. A number of problems have been suggested with Cooper's proposals:

• One criticism is of the fairness of having developing countries being subject to the same tax rates as developed countries, given their relative level of welfare and responsibility for the climate problem.
• It has been asked what incentive developed countries would have to adopt a tax.
• It is possible that governments would attempt to neutralize the effects of the tax on certain economic sectors.
• Given the presence of existing tax distortions, it might not be politically feasible to implement a uniform tax rate.