Bottom Line on Carbon Taxes

This World Resources Institute fact sheet explains the mechanics of carbon taxes, comparing them to cap-and-trade programs and discussing their economic impacts, implementation in various countries, and political status in the United States.

• A carbon tax is a fee on fossil fuels and other primary products, such as refrigerants, based on the volume of greenhouse gases (GHG) they emit, which creates a financial incentive to reduce emissions. It differs from cap-and-trade programs because a tax imposes a direct fee without setting an emissions limit, whereas cap-and-trade sets a limit (cap) and allows the market to determine the price of emission allowances.
• Carbon taxes are typically imposed on 'upstream' producers like oil wells or coal mines, but costs are often passed down to 'downstream' businesses and households. Because these taxes are regressive—meaning lower-income consumers pay a higher percentage of their income—some programs use 'revenue recycling' to fund rebates, energy efficiency upgrades, or reductions in other regressive taxes.
• Several countries implemented carbon taxes starting in the 1990s, including Norway, Finland, Sweden, and the Netherlands, with similar policies in Japan and other European nations. British Columbia established a revenue-neutral tax on fossil fuels starting at C$10 (approx. US$9.80) per metric ton of CO2-equivalent, planned to increase to C$30 (US$29.35) by 2012.
• National carbon tax proposals have faced political sensitivity in the United States, with failed attempts including a 1993 'BTU tax' and two carbon tax bills proposed in the House of Representatives in 2007. However, some municipal-level measures exist, such as a $0.044 per metric ton of CO2 fee for businesses in the San Francisco Bay Area.

APA

World Resources Institute (n.d.). Bottom Line on Carbon Taxes. https://www.wri.org/research/bottom-line-carbon-taxes

Chicago

World Resources Institute. Bottom Line on Carbon Taxes. n.d. https://www.wri.org/research/bottom-line-carbon-taxes.

Wikipedia

{{cite report |author=World Resources Institute |title=Bottom Line on Carbon Taxes |url=https://www.wri.org/research/bottom-line-carbon-taxes |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldresourcesinstitutendbottom, author = {{World Resources Institute}}, title = {{Bottom Line on Carbon Taxes}}, institution = {World Resources Institute}, url = {https://www.wri.org/research/bottom-line-carbon-taxes}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }