Analysis of Carbon Tax: Economics and Environmental Impact Report

This report provides an overview of carbon tax, discussing its definition, purpose, and economic implications. It explains how carbon taxes are levied on fossil fuels like coal, oil, and natural gas to curb carbon emissions and promote the use of non-carbon fuels. The report delves into the discussion of carbon dioxide emissions and their impact on the atmosphere, highlighting the role of carbon tax as a pollution tax and a price instrument, also known as a Pigovian tax. It further explores the social costs of carbon, the government's role in setting emission limits, and the economic impact of carbon taxes, referencing the Australian context, including the Clean Energy Act 2011 and the Emission Reduction Fund. The report concludes by summarizing the role of carbon tax in mitigating the negative effects of carbon emissions and its implications on the budget and market response.

Running head: TAXATION LAW
Carbon Tax
Name of the student:
Name of the university:
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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Conclusion:................................................................................................................................4
Bibliography:..............................................................................................................................5

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Introduction:
Carbon tax is levied on certain fossil fuels such as coal, oil and natural gas. The
main objective of the tax is to protect our society from carbon ignition1. It is scientifically
proved that excessive emission of Carbon Di Oxide caused serious damage to the climate and
this tax compels the users of the fuel to pay for all the damages. It also motivates the users to
move to non-carbon fuels.
Discussion:
The main driving force of the fossil fuel is carbon and hydrogen. When the
energies are being used, Carbon Di Oxide emitted from it and that caused dangerous impacts
on the atmosphere2. Most of the CO2 are emitted from the coal and carbon tax helps to
restrict the excessive usage of CO2. Carbon tax helps the carbon fuel users to restrict
excessive use of carbon fuels. It also helps to fuel the economy by increasing the revenue
criteria of the carbon fuel. The nature of the tax can either be Pigovian or regressive. In most
of the OECD countries, carbon taxes are levied indirectly. It can be observed that the taxes
are levied on the motor cars and energy products. The main reason of global warming is
excessive use of Carbon Di Oxide3. From the theory of Economics, carbon tax is sort of
pollution tax and act as a price instrument which is imposed on the Carbon emission. The
nature of the tax is of negative externality and therefore, known as pigovian tax which is
equal to the marginal damage cost. Besides the economical impacts, carbon taxes have
certain social cost which had been established for the first time in Reagan administration in
1 Aghion, Philippe, et al. "Carbon taxes, path dependency, and directed technical change: Evidence from the auto
industry." Journal of Political Economy 124.1 (2016): 1-51.
2 Baranzini, Andrea, and Stefano Carattini. "Effectiveness, earmarking and labeling: testing the acceptability of carbon taxes
with survey data." Environmental Economics and Policy Studies 19.1 (2017): 197-227.
3 Chiu, Fan-Ping, et al. "The energy price equivalence of carbon taxes and emissions trading—Theory and
evidence." Applied energy 160 (2015): 164-171.

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the year 19814. Limitation on the emission of carbon has been fixed by the government and
the international environment protection authority, and in case of excessive emission, the tax
has been imposed on the reason with an intention to curb the environmental disaster. The
social cost of carbon is based on Integrated Assessment Model that works for calculating the
effect of carbon on climate change. Further the monetary damage regarding the climate
pollution has been calculated by the model. The SCC figure computed in 2015 is $31.2 per
ton of CO2 for emissions, this quantity will rise 3% in real terms, to account for price
increases till 2050. Estimates of the dollar cost of carbon dioxide pollution is given per tonne,
either carbon, $X/tC, or carbon dioxide, $X/tCO2. One tC is roughly equivalent to 3.7 tCO2
(total Carbon Di Oxide).
In Australia, carbon tax was imposed during the period of Gillard Labour
Government and the term was included under the provision of Clean Energy Act 20115.
However, in 2014, the Act was repealed and Emission Reduction Fund has been established
in the year 2014. In Australia, clean energy future plan is objected to reduce the effect of
greenhouse gas and carbon pricing is a part of it. The main aim of this policy is to limit the
emission of the gas below 5% by 2020 and 80% by 2050 and improve the energy efficiency
("Carbon Taxes – Parliament Of Australia"). Considering its importance, the Australian
government had announced the plan as a part of the trading scheme in 2014.
4 Dissou, Yazid, and Muhammad Shahid Siddiqui. "Can carbon taxes be progressive?." Energy Economics 42 (2014): 88-
100.
5 Lenzen, Manfred, Arunima Malik, and Barney Foran. "Reply to Schandl et al., 2016, JCLEPRO and Hatfield-Dodds et al.,
2015, Nature: How challenging is decoupling for Australia?: Reply to: Schandl H., Hatfield-Dodds S., Wiedmann T.,
Geschke A., Cai Y., West J., Newth D., Baynes T., Lenzen M. and Owen A.(2016). Decoupling global environmental
pressure and economic growth: scenarios for energy use, materials use and carbon emissions. Journal of Cleaner Production
132: 45–56; Hatfield-Dodds S., H. Schandl, PD Adams, TM Baynes, TS Brinsmead, BA Bryan, FH ...." Journal of Cleaner
Production 139 (2016): 796-798.

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Conclusion:
To sum up, it can be stated that carbon tax is a medium to curb the negative impact
of carbon emission on the nature. It has certain economical and social impacts. The tax rates
are quite helpful to the budget system and a price signal regarding market response has been
sent by this.

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Bibliography:
"Carbon Taxes – Parliament Of Australia." Aph.gov.au. N.p., 2018. Web. 3 Feb. 2018.
Aghion, Philippe, et al. "Carbon taxes, path dependency, and directed technical change:
Evidence from the auto industry." Journal of Political Economy 124.1 (2016): 1-51.
Baranzini, Andrea, and Stefano Carattini. "Effectiveness, earmarking and labeling: testing the
acceptability of carbon taxes with survey data." Environmental Economics and Policy
Studies 19.1 (2017): 197-227.
Chiu, Fan-Ping, et al. "The energy price equivalence of carbon taxes and emissions trading—
Theory and evidence." Applied energy 160 (2015): 164-171.
Dissou, Yazid, and Muhammad Shahid Siddiqui. "Can carbon taxes be progressive?." Energy
Economics 42 (2014): 88-100.
Lenzen, Manfred, Arunima Malik, and Barney Foran. "Reply to Schandl et al., 2016,
JCLEPRO and Hatfield-Dodds et al., 2015, Nature: How challenging is decoupling for
Australia?: Reply to: Schandl H., Hatfield-Dodds S., Wiedmann T., Geschke A., Cai Y.,
West J., Newth D., Baynes T., Lenzen M. and Owen A.(2016). Decoupling global
environmental pressure and economic growth: scenarios for energy use, materials use and
carbon emissions. Journal of Cleaner Production 132: 45–56; Hatfield-Dodds S., H. Schandl,
PD Adams, TM Baynes, TS Brinsmead, BA Bryan, FH ...." Journal of Cleaner
Production 139 (2016): 796-798.