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Could a Carbon Tax Work?

Over the past couple of years, several suggestions for limiting the amount of greenhouse gases that are produced by the burning of fossil fuels and one of these suggestions has been to hit a company where it truly hurts…it’s pocket. But could a tax of carbon emissions and green house gases work? A recent study published in the Natural Resource Modeling Journal seem to suggest so.

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Here is the abstract of the study:

Growing vegetation removes carbon from the atmosphere. This carbon is then stored in biomass, soils and products for varying lengths of time. We outline a comprehensive tax policy for jointly regulating these carbon stocks for climate change mitigation. The central role of soil carbon storage is emphasized. We present an analytical partial equilibrium land use sector model, which we use to derive the optimal allocation of land and biomass over time, taking into account the raw-material value of the produced biomass and the social value of carbon storage. The optimization yields a set of monetary shadow values for land and biomass carbon fluxes. These values can be interpreted as the fluxes’ socially optimal prices and can thus be used to outline a comprehensive land use sector carbon tax policy. The taxation can be organized in various ways. We present a solution that is easy to implement and monitor in practice. As the policy jointly regulates all carbon stocks, carbon impact leakage between land uses and regions is prevented.

You can read the full study here.

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