This page reports on carbon taxes that have been proposed or enacted around the world.

Introduction

The Reality Of Carbon Taxes In The 21st Century is the name of a new (Jan. 2009) book published by a team at Vermont Law School’s Environmental Tax Policy Institute headed by longtime environmental-taxation scholar Janet E. Milne. The book’s four detailed chapters,

• Carbon Taxes in the United States: The Context for the Future
• The Design of Carbon and Broad-based Energy Taxes in European Countries
• Environmental and Economic Implications of Taxing and Trading Carbon: Some European Experiences, and
• Carbon Taxation in British Columbia,

indicate its depth and scope. The entire 114-page book may be downloaded here. We look forward  to reading it and invite visitors to this site to submit their own reports on it.

In 2007, a research fellow for the Kansas Energy Council, Trisha Shrum, produced an excellent report on climate policy issues that includes a survey of carbon taxes in place around the world. We recommend Trisha’s report highly. Click here. Below, we have vetted and digested Trisha’s material for Finland, Sweden, Great Britain and New Zealand.

Readers interested in calculating carbon contents of key energy forms (electricity, major petroleum products) may want to download this spreadsheet created by CTC in Sept. 2007. Though not yet comprehensive, it contains useful data and conversions and is fully sourced.

Last, we note two other works that address impacts of in-place carbon taxes. A 2004 paper by Berkeley Prof. David Rich, Climate Change, Carbon Taxes, and International Trade, is focused on reconciling national carbon taxes with international trade agreements and summarizes, but it briefly reports on CO2 reductions from carbon taxes in Sweden, Finland and Denmark. Rich’s paper cites International Trade and Climate Change Policies (preview only), a volume in the Royal Institute of International Affairs series and a possible rich source of data. We invite visitors to this site to read these works and share their observations with us.

Country-by-Country Review

(Note: See comment at top of page on the new UVm Law School book, The Reality Of Carbon Taxes In The 21st Century.)

Finland enacted a carbon tax in 1990, the first country to do so. While originally based only on carbon content, it was subsequently changed to a combination carbon/energy tax (U.S.EPA National Center for Environmental Economics). The current tax is €18.05 per tonne of CO2 (€66.2 per tonne of carbon) or $24.39 per tonne of CO2 ($89.39 per tonne of carbon) in U.S. dollars (using the August 17, 2007 exchange rate of USD 1.00= Euro 0.7405). Current taxes are summarized in a Ministry of the Environment fact sheet Environmentally Related Energy Taxation in Finland.

Sweden enacted a tax on carbon emissions in 1991. Currently, the tax is $150 per ton of carbon, but no tax is applied to fuels used for electricity generation, and industries are required to pay only 50% of the tax (Johansson 2000). However, non-industrial consumers pay a separate tax on electricity. Fuels from renewable sources such as ethanol, methane, biofuels, peat, and waste are exempted (Osborn). As a result the tax led to heavy expansion of the use of biomass for heating and industry. The Swedish Ministry of Environment forecasted in 1997 that by 2000 the tax policy would have reduced CO₂ emissions in 2000 by 20 to 25% more than a conventional, regulatory-based policy package (Johansson 2000). On September 17, 2007, Sweden’s government announced that it will increase its carbon taxes to address climate change. Petrol prices will go up 17 öre per litre, with the increase in fuel tax calculated on the basis of a 6 öre tax increase per kilo of CO₂ emitted. (The Local)

Great Britain introduced a “climate change levy” in 2001 on the use of energy in the industry, commerce and public sectors. Revenues are used to provide offsetting cuts in employers’ National Insurance Contributions and to provide support for energy efficiency and renewable energy; the Department of Environment, Food and Rural Affairs (DEFRA) states that the levy “entails on increase in the tax burden on industry as a whole and no net gain for the public finances.” Rates are 0.15p/kWh for gas ($0.003) , 0.07p/kWh for liquid petroleum gas ($0.0014), 0.44/kWh ($0.0087) for electricity and 0.12p ($0.0024) for any other taxable commodity (using the August 17, 2007 exchange rate of USD 1.00= GBP 0.503). There are various exemptions including for electricity generated from new renewable energy and fuel used for “good quality” combined heat and power. All of the above information, as well as additional information, is available on the DEFRA web site. The Conservative Party leader has called for a “carbon levy” and the abandonment of the climate change levy; the carbon levy would make a distinction based on the carbon content of fuels. (Energy Saving Trust – About EST).

New Zealand made plans in 2005 to enact a carbon tax equivalent to $10.67 (of U.S.) per ton of carbon (based on conversion rate of USD 1.00 = NZD 0.71). The tax would have been revenue-neutral, with proceeds used to reduce other taxes (Hodgson 2005). However, a new government determined that the carbon tax would not cut emissions enough to justify the costs, and the tax was abandoned (Myer 2005). [CTC addendum: In Sept. 2007 the government unveiled a proposed emissions cap-and-trade scheme intended to cover all carbon emissions. While we don't yet have a link to the government's proposal, the NZ Green Party's preliminary assessment provides some details.]

The remaining material on this page was developed by CTC.

Boulder (Colorado) implemented the United States’ first tax on carbon emissions from electricity, on April 1, 2007, at a level of approximately $7 per ton of carbon. According to the City of Boulder, the tax is costing the average household about $1.33 per month, with households that use renewable energy receiving an offsetting discount. The city expected the tax to generate about $1 million annually until its expiration in 2012, with the revenues used to fund Boulder’s climate action plan to further reduce energy use and to comply with the Kyoto Protocol (Kelley 2006). In June 2009, the City Council voted unanimously to raise the tax level, effective Aug. 6, 2009. Although press reports did not specify the new rate, the expected increase in revenues, some $810,000 annually,  suggests that the increase is on the order of 80%, or perhaps $5-$6 per ton of carbon (on top of the original $7/ton).

Quebec

Canada’s second largest province began collecting a carbon tax on “hydrocarbons” (petroleum, natural gas and coal) on Oct. 1, 2007. Though the tax rate is quite small, the tax nevertheless made Quebec the first North American state or province to charge a carbon tax.

Here are details from the Toronto Globe & Mail last June (pay required):

Quebec will introduce Canada’s first carbon tax this fall, forcing energy producers, distributors and refiners to pay about $200-million a year in taxes as one part of an ambitious plan to fight global warming.

About 50 energy companies will be required to pay the new tax, including Ultramar Ltd., Petro-Canada and Shell Canada Ltd., which operate refineries in the province as well as distributors Imperial Oil Ltd., Irving Oil Ltd. and independent retailers.

Oil companies will be required to pay 0.8 cents for each litre of gasoline distributed in Quebec and 0.938 cents for each litre of diesel fuel. The tax is expected to generate $69-million a year from gasoline sales, $36-million from diesel fuel and $43-million from heating oil.

At March 2008 exchange rates, the petroleum tax rate equated to just 3.1 cents (U.S.) per gallon of gasoline and 3.6 cents for diesel. Moreover, because only a tiny fraction of electricity in Quebec is generated from fossil fuels (virtually all is from hydroelectricity), power prices are essentially unaffected.

Spread across Quebec’s population of 7,546.000 million (2006), the anticipated annual carbon tax revenue of $200 million is only $26.50 per person per year ($26.75 U.S.). For the U.S. to generate the same per capita revenue through a carbon tax would entail a rate of just $4.26 per ton of carbon (equivalent to $1.16 per ton of carbon dioxide), which equates to 1.1 cent (U.S.) per gallon of gas.

British Columbia

British Columbia inaugurated a revenue-neutral carbon tax in 2008 that qualifies as far and away the most significant carbon tax in the Western Hemisphere. The tax started on July 1, 2008 at a rate of $10 (Canadian) per metric ton of carbon dioxide, and was set to rise by $5/tonne annually to reach $30 per tonne of CO2 in 2012. The first increase did indeed kick in on July 1, 2009, bringing the tax rate to $15/tonne. The carbon tax revenues are being returned to taxpayers through personal income and business income tax cuts, as promised by then-BC finance minister Carole Taylor, who spearheaded the push for the tax.

In announcing the BC carbon tax in February 2008. Taylor estimated that it would equate to an additional 2.4 cents (Canadian) on a litre of gasoline, or 9.1 cents Canadian (9.2 cents U.S.) per gallon — triple the level of the Quebec carbon tax. In 2012, when the BC tax will have ramped up to $30/tonne, the carbon tax there will equate to 7.24 cents per litre of gasoline and 8.29 cents per litre of diesel, making it roughly eight times as large as Quebec’s tax.

The first 40 pages of the 200-page BC Budget and Fiscal Plan, dated Feb. 19, 2008, spell out the rationale, impacts and mechanics of the British Columbia carbon tax, including the revenue return provisions. These materials are essential reading for any carbon tax advocate seeking to master not only the details of carbon taxing but communication tools for making a carbon tax palatable to the public. We also highly recommend Alan Durning’s March 13, 2008 Gristmill article, which usefully parses four principles embodied in BC’s carbon tax: revenue neutrality, phased implementation, protection for families, and broad coverage.

In May 2009, British Columbia voters rewarded Liberal Party Premier Gordon Campbell, under whose aegis the province’s carbon tax was proposed, devised and instituted, with a third four-year term. Our post, BC Voters Stand By Carbon Tax, reports on the election’s significance for carbon tax campaigners. See also Macleans’ similar but more detailed take, Did Gordon Campbell Win Because of His Carbon Tax?

In the same vein, the Vancouver Sun reported on Nov. 28, 2009 that the opposition New Democratic Party was still reeling from its strident opposition to the BC carbon tax during the May provincial election:

Many party activists believe the NDP’s fierce attack on the B.C. Liberals’ carbon tax during the last election overwhelmed the party’s own environmental platform.

“I think the NDP lost the point in terms of its green credibility,” said David Black, a communications theory professor at Royal Roads University in Victoria.

In mid-2007 we reported that Canadian Green Party leader Elizabeth May was calling for a nationwide tax of $50 (Can.) per tonne of carbon (not carbon dioxide), with the level doubling in 2020. Allowing for the nearly 4-fold molecular-weight ratio of CO2 to C, the British Columbia carbon tax met the Green Party’s goal in mid-2009.