Carbon taxes not levied with intent to lower emissions but create revenue for govt study finds

New Delhi, Aug 14 (PTI) Low carbon taxes levied on enterprises -- a certain amount of money to be paid to the government for every ton of carbon dioxide emitted -- are not aimed at lowering emissions, but to generate tax revenues or meet international expectations, a study of carbon tax systems across 19 countries found.
    Researchers noted that even though levying a carbon tax is widely seen as an effective policy for addressing emissions -- and mitigating climate change -- the study casts doubts as to whether carbon taxes should be viewed as a climate policy.
    "Reducing emissions is often not the primary rationale of carbon taxes in the real world," lead study author Johan Lilliestam of Germany's Friedrich Alexander University Erlangen-Nurnberg said.
    "Understanding the explanatory factors of such low carbon taxes is a fundamental topic in climate policy research. Yet, to date, no multi-case study has investigated the rationales of low carbon taxes beyond binary assessments of whether or not such a tax exists," Lilliestam said.
    Published in One Earth, the study analysed government policy designs and justifications for 19 national carbon taxes introduced between 1990 and 2023.
    "Most initially low carbon taxes primarily followed fiscal rationales or were implemented to meet international expectations," the authors wrote, and added that "the primary rationale or priority outcome for enacting carbon taxes is not always to reduce emissions."
    In 2023, 12 of the 19 countries maintained carbon tax rates below benchmark levels, with many offering significant exemptions.
    "This indicates that many carbon taxes -- the way they were implemented -- were not primarily or at all designed to reduce emissions," Lilliestam said.
    "Of the 25 national carbon tax systems that exist, almost half of the taxes remained below the threshold for significantly affecting emissions, even after several initially low carbon taxes had been ratcheted up," the lead author said.
    The team also found that in the first five years of levying carbon taxes, only Switzerland, France, and Canada showed strong evidence of 'within-policy sequencing' -- a strategic ordering and implementing of a policy to achieve specific, larger objectives.
    The countries started with a low but politically feasible tax, increasing it later once supportive coalitions became stronger and reforms became more feasible, the authors said.
    While other countries, including Finland, Iceland, and Ireland, later increased carbon taxes -- sometimes strongly -- showing that within-policy sequencing does happen, such processes have been slow in the past, taking up to three decades, the team added.
    "A country having a carbon tax is not in itself an indication of climate policy progress, and the increasing number of carbon pricing schemes is not in itself evidence of carbon pricing being a successful climate policy instrument," Lilliestam said.
    The authors emphasised that if the primary rationale of a carbon tax is not directly related to climate action, the taxes may remain low for many years, and countries may hide behind "we have a carbon tax" and further postpone more ambitious, urgently needed, transformative climate policies.

(This story has not been edited by THE WEEK and is auto-generated from PTI)