Adding Quantity Certainty to a Carbon Tax

Resources for the Future Discussion Paper 16-43

28 Pages Posted: 14 Oct 2016

See all articles by Marc A. C. Hafstead

Marc A. C. Hafstead

Stanford University

Gilbert E. Metcalf

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

Roberton C. Williams

University of Maryland - Department of Agricultural & Resource Economics; National Bureau of Economic Research (NBER); Resources for the Future

Date Written: October 12, 2016

Abstract

A concern often raised about a carbon tax is that it does not provide any certainty as to the quantity of emission reductions achieved under the policy. We explore in this Issue Brief how greater emission reduction certainty can be built into a carbon tax. We first define a Tax Adjustment Mechanism for Policy Pre-Commitment (TAMPP). A TAMPP is an adjustment mechanism for the tax rate of a carbon tax to ensure that targeted emission reduction milestones are met over the next few decades. We then provide some guidance based on economic principles related to various design considerations that should be incorporated in a cost-effective and politically realistic TAMPP.

Keywords: carbon tax, emissions uncertainty, climate

JEL Classification: Q58, H23, Q50

Suggested Citation

Hafstead, Marc A. C. and Metcalf, Gilbert E. and Williams, Roberton C., Adding Quantity Certainty to a Carbon Tax (October 12, 2016). Resources for the Future Discussion Paper 16-43. Available at SSRN: https://ssrn.com/abstract=2852003 or http://dx.doi.org/10.2139/ssrn.2852003

Marc A. C. Hafstead (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Gilbert E. Metcalf

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-3685 (Phone)
617-627-3917 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Roberton C. Williams

University of Maryland - Department of Agricultural & Resource Economics ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/cgi-bin/familyinfo.pl?a=a&user=roberton_williams

Resources for the Future ( email )

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Washington, DC 20036
United States

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