On Carbon, Tax and Don’t Spend

The idea of a tax on carbon dioxide emissions, which contribute to global warming, is gaining attention worldwide, but there’s little agreement on the best design. Monica Prasad, sociology professor at Northwestern University, notes that for the past two decades, the countries of Scandinavia have had carbon taxes in place. Success in reducing emissions depends on how countries spend that revenue: Unfortunately, the tax in Norway has resulted in growing, not reduced emissions. Prasad recommends that politicians serious about combating industrial pollution should emulate Denmark’s revenue-neutral system, which returns the tax income to industry for use on alternative energy and other innovations that protect the environment. While the Scandinavian cases suggest that a carbon taxes probably won’t both reduce emissions and raise funds for other purposes, the case of Denmark demonstrates how governments can lower emissions and maintain companies’ international competitiveness. Prasad concludes that the goal of any carbon tax should be reducing emissions and not increasing revenue. – YaleGlobal