3. A global carbon tax
The incidence of emission of carbondioxide, the most important anthropogenic
greenhouse gas, has been considered in Section II. Energy taxes are a strong and low-cost
mechanism for the control of carbondioxide emission because it is predominantly caused by
energy production and use. Most authors seem to agree that the advantage of energy taxes
lies in that they could be designed to directly target the primary source—transport fuels—of
carbondioxide emission, are more amenable to global taxation than other tax candidates, and
could yield significant revenue.
a. Appropriate tax base
The base for an energy tax could, of course, be alternatively selected, for example, the
carbon content of fossil energy or the Btu content of fossil energy. Scheraga and Leary
( 1994) compare and contrast the advantages and disadvantages of a carbon tax with a Btu tax.
They examine both as taxes on the primary production of fossil energy, setting the tax rates
such that carbondioxide emissions in 2000 are equalised to 1990 levels. While the Btu tax
generates greater emission reductions, the carbon tax has ancillary benefits in that it comes
closest to the ideal of placing a uniform price on carbondioxide emissions, a condition
necessary for least cost abatement, which their model confirms. 14
Therefore, the carbon tax has been especially subjected to analysis and critique, as well
as to various degrees of application in the European Union (EU). Many authors have
discussed its advantages and disadvantages-Sterner, Dahl and Franzen (1992). Barker (1993),
Shome and Spahn (1994) and Scheraga and Leary (1994)—to name only a few.
b. Indicators of growth in energy consumption
Gasoline demand has been widely modeled and analysed. Typically, demand for
transport fuels is derived from vehicle stock, its composition and vehicle utilisation. Sterner
et al (1992), using such a model, estimated demand elasticities to make inferences regarding
Their simulations show that the Btu tax would be between 25 percent and several
times higher than the least cost carbon tax for the same abatement. Despite the
attractiveness of the Btu tax, therefore, in terms of revenue, it could not be justified
on efficiency grounds.
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