I think an eco-tax is theoretically possible, but as a practical matter would have many difficulties being implemented. Perhaps the biggest obstacle would be whether people would accept such a tax as being 'fair.' Most people think that people with higher incomes should pay higher taxes, and the same for businesses, that is those with higher incomes should pay higher taxes. A pure eco-tax would obviously leave out the 'income' aspect of the current highly progressive tax system, which is based on income.

I think it won't work in reality because Eco-tax is based on Polluter pays principle (PPP). Moreover, it's difficult to identify, measure and control or parameters the Indirect Polluters. We can take the Frence case as a example. Why their eco-tax became legal but not applied yet? Because there are no "Equility" eco-tax burden . All French and foreign vehicles transporting commercial goods weighing over 3.5 tons which use the 15,000km taxable road network defined by the French Government and it will be cotroled by mandated GPS system. In other hand, people use Shipping service or airmail transporting won't be charge. A vicious circle can be set up, therefore people against it strongly. First, the Industries change their transport tool from high taxed truck to others then all the truck drivers will lost their jobs. Second, the industries add this cost to products and let consumer share the tax. Then consumer will stop to buy their local products and go for cheaper global products. Finally, the local proccesing companies will go bankrupt.

Sounds like 'could Bt Brinjal or genetically modified vegetable replace all existing vegetables'?

Jokes apart, proposal is good if implemented, save for the third world who will have the burden that is good for nothing.

In a pewrfect economy, all costs and benefits should be included. Rhat would mena that the markets will function if all the positive and negative externalities are internalized. Then there woukld be no need for environmental taxes, because all the impact would be paid by the ones who produce the impact. The other way ariound, if someone activities produce a positive impact ( in any dimensión of sustainable development) then, they should be paid. The Question of David is retorically interesting, because it put on the table the issue of responsibility towards sustainable human development.

I agree with Murphy Smith

If you are only interested in collecting the same total tax revenue as today, I would say, of course, why not? I also would argue, that the administrative costs of a CO2 tax are relatively low, if resources like gas, oil, coal etc. are taxed at the point of extraction or if imported at the border.Though, this does not hold for all other harming substances.

However, the main obstacle of this proposal is, that an environmental tax is a regressive tax. The relative tax burden (tax to income ratio) of poor families with a lot of children and jobless people, who pay today no income tax would explode, and the relative tax burden of the super rich, who save a huge share of their income would fall dramatically.

In contrast to that, a tax on land rents like it was proposed by Henry George may be a good substitute for all other taxes. Additionally. the advantage of this tax is that nobody can evade it. The same holds for a CO2 or carbon tax.

As both Smith and Stauvermann point out, any eco-tax is likely to be quite regressive. In addition, it is hard to imagine that any such tax would generate enough revenues to replace all or even most existing taxes. However, unlike other taxes, eco-taxes are efficiency enhancing rather than efficiency reducing. That is, the behavior they discourage is not a desired behavior like working or investing, but an undesireable, polluting behavior. Hence the optimal solution would be to implement as many eco-taxes as politically possible, and adjust the remaining taxes down in such a way as to maintain the appropriate overall level of tax progressivity.

Teoretically good idea but practically have many problems. How to distribute tax burden among taxpayers? How to handle equity or fairness issues. Also, how do you tax air??? How can you define tax base?...

Whern I refer to internalizing the positive and negative externalities, it can be made through the increased costs , through taxation ( in the costs side) or through PES or other kind of incentives ( in the positive side). Then thast would not be regressive from an equity point of view. But I am certain that is very difficult and unpractical to opérate such a system. On the other side all the diomensions of sustainability have to be included and not only the ecologic dimensión.

Yes.

Solving the widely touted regressive nature of a carbon tax would be trivially easy. Simply divide total revenue by the population, and send everyone an equal-share "green dividend." The poor spend a higher _proportion_ of their income on energy, but a smaller absolute amount, so on average they would come out way ahead, even before they started conserving or switching away from fossil fuels. Even if only half the revenue were rebated this way, and the other half displaced some other tax base, the poorest would come out ahead.

I believe that solving the regressive nature of a carbon tax would not be trivially easy. The solution devised by Peter looks quite difficult to implement (at least to me).

Luciano: How and why would it be difficult to implement? Politically, perhaps, if as many people have been propagandized into taxophobia as some would have us believe.

Technically/bureacratically, it's not hard at all. Advanced countries have centuries of experience with excise taxes, and can impose them quite efficiently. A carbon tax would only require taxing about 3-4,000 entities in the U.S.: coal mines, petroleum refineries, natural gas processing plants - to capture the vast majority of emissions. Adding up the revenue is simple. It's just as easy to divide the revenue by the population, every month or quarter, say, and send an equal check to every household. Where's the difficulty? For more, you can read a paper I co-wrote five years ago, at https://dl.dropboxusercontent.com/u/71714315/Ghosh-Gray-ScannedPaper-2.pdf. I also strongly recommend reading the best book I've seen on this topic, The Climate Casino, by William Nordhaus, published in 2013.

M. Gallant - a tax on exactly the carbon content of fossil fuels, as or shortly after they are extracted from the ground. That's easy to measure, with the minor, accountable exception of hydrocarbons that are not burned and become permanently sequestered (plastics in landfills, maybe?). There's a nearly perfect correspondence between fossil carbon that's burned, and carbon that becomes atmospheric CO2.

The simplicity of taxing coal, oil, and natural gas carbon content is that it's an easy calculation. Compare that to the idea of capping, trading, and monitoring (!?!?) CO2 emissions from every factory, car, boat, airplane, and lawn mower. The second beauty of a tax is that we don't need to fret about the "potential to adjust activity." One of the fundamental (no-brainer?) observations of economics is that people will reduce activities that have a higher price, and a tax will surely increase the price. If we set the tax at roughly the right level to reflect a proper social valuation of the negative externalities, people can be counted on to reduce fossil carbon consumption by the "right" amount. We need not and should not worry about the details of how they do that. Given the right incentives, they are likely to innovate better and quicker than we now imagine.

If and when people come up with proven long-term methods for sequestering CO2, they could be subsidized at the same rate per ton as the tax. This way, if a coal-fired plant captured all of it's CO2 and stored it for at least 1,000 years, it would pay zero net tax. I wouldn't hold my breath about that, since avoiding emissions in the first place is likely to be far cheaper.

Without such incentives, the other policies we're playing with, including efficiency standards that are always inefficient and often counterproductive, will add up to very little. A carbon tax would make all the other complicated workarounds unnecessary.

Please don't be distracted by phony arguments about how we don't know precisely the right level of such a tax. We will _never_ determine that. Meanwhile, we cannot avoid continuing to use a tax rate of zero, which we _know_ is the wrong answer (unless we're the coal or oil industry and their hired or conned denier shills).

I'm not sure how to answer specific comments. I'm trying to answer Erdal Gumus...

Please see my other comments in answer to questions about difficulty and fairness, but I'll try to answer yours here.

Q: How to distribute tax burden among taxpayers?

A: Tax the carbon content of fossil fuels. Period. to The burden will be distributed as it should be - based on who contributes the most to the environmental problem.

Q: How to handle equity or fairness issues.

A: First, what's unfair about taxing people more when they do more damage? Second, to the extent that a carbon tax is regressive, one easy solution would be to rebate all or part of the tax revenue equally by population. Poor people would get the largest rebates, and nearly all of them would come out ahead on the deal.

Q: Also, how do you tax air???

A: Who said anything about taxing air? Luckily in this case, we can tax the fossil fuels, since their carbon content is mapped 1:1 into the CO2 emissions.

Q: How can you define tax base?...

A: Answered above. A carbon tax is a tax on (fossil fuel) carbon. Is there something confusing about the wording?

My experience in Belgium where energy prices are already very high (if not one of the highest in the world). A good case study to observe what happens with high energy prices (and accise taxes) in a rich country.

Taxes have different goals than cannot simply be substituted one to the other. The effect if not the goal of income taxes is indirect redistribution of purchasing power from the rich to the poor, and income for the governement (for "common goods" expenditures): rich pays the government, the government provides services to all, including parks, police, education, roads, social security, subsidies to companies etc. The poor are probably net receivers of those services (a rich can pay for better services, have a big house with a big garden, a good place in the city, private doctors etc).

So, you have to divide your question in 2 questions:

1) Removing existing tax system

2) Adding an environmental tax.

Removing existing taxing system: if the revenue tax is progressive (rich pay more, poor are exempted), removing the income tax benefits the rich on the cost of government income and government services.

Adding eco-taxes in order to keep government income: if the tax is flat (e.g. tax per CO2), "polluters pay". One question is: who are the polluters? Not necessarilly the rich. In Belgium, rich consume almost the same household energy per equivalent inhabitant (OECD scale) than the poor because they have bigger families (scale effect), better efficiency (they are the owner of their houses and they could invest in insulation and high yield burners, solar pannels etc). The typical poor is a retired person isolated in a relatively big house (kids left) or a renter who has no decision power on the house's energy efficiency. Figures are here (in French, sorry):

http://economie.fgov.be/fr/binaries/Carrefour_economie_2014_02_tcm326-244068.pdf

This is not true for the private vehicule energy consumption (rich tempt to consume more), neither for air transport consumption (with the exeption of the first revenue decile in Belgium: poor workers tempt to travel by plane to go to see their family abroad: they have no car). It might depend on the cost of dwellings: some rich might live in the center of expensive cities, needing less (new efficient) car use, other poor might live outside in a cheep household, with the need to use an old inefficient car every day for night work when there is no public transport available. The problem of the poor is that he/she is locked into a condition with less choice or investment power. That means that, for goods of primary necessity need (like heating, mobility - energy is a prime necessity good with low elasticity with incom (rich does not consume much more than poor), the effect of rising price (tax) is limited. The people will not reduce their consumption bellow a minimum vital level ... or fall into fuel poverty (they will have cold).

If the eco-tax is not flat (e.g. progressive electricity price) there is a problem to finance the tax and exemption system: you still need the costly income tax system in order to know who should be exempted (who is rich, who is poor).

First conclusion: the shift might not be fair for the poor.

On macro level, an energy tax will reduce the consumption. On micro level, this consumption might be reduced mainly by the poor on short term (on longer term, the rich will invest for a better efficiency, then reduce consumtion in the absence of rebound effect). Of course, the rebound effect might do the rich consume even more. Moreover, if energy becomes a luxury good, a tax or bigger price might augment consumption (Veblen effect). We see this in Belgium with the success of 4x4 vehicles: Belgium beeing a rich country with high social security, most people can "pay to pollute". That means that high price do not reduce pollution. This is what we observe in Belgium: we have a bigger ecological (and carbon) footprint than USA.

What if high prices would reduce pollution?

Then governement would have a revenue problem. A successfull energy tax would destroy the taxation basis, and the government would be forced to find other revenues.

There are other problems with resource taxation.

1) A theoretical contradiction (internalization is based on neoclassical behaviours, homo oeconomicus and the perfect market will reduce the final consumption - but any tax or internalisation introduces a bias in the perfect market (it contributes to an imperfect market).

2) An unfair distributional effect (see above) if flat. "Affluent country can pay to pollute".

3) A measurement problem: it's impossible to find the right price for environmental services or burden (including human life loss cost from pollution) outside the perfect market.

4) Inefficiency and possible rebound or Vleben effect. That's what we observe in Belgium with accises and high prices.

5) Limited global effect: if consumption is reduced in USA, prices fall down on planetary level, global consumtion remains the same. (only subsequent technological development could indirectly help the planet - if no rebound effect).

My conclusion in another paper (in French, annexe): economic tools have no global effect on a renewable critical capital. They organize a redistribution of the resource from the poor to the rich.

On global level, I'm afraid mainly technology and policies (limitations, right distribution, negociations, protection, prohibitions, norms) can reduce big environmental or resources problems. Like we observed for ozone hole and many toxicals. Tax system should serve it's main purpose: financing the government on the lower cost and fairest possible way.

Papers I like on related subject: Richard Starkey (2012) Personal carbon trading: A critical survey. Part 1: Equity, Ecological Economics 73, 7-18

Part 2: Efficiency and effectiveness, Ecological Economics 73, 19-28.

And the annexe

This discussion has gone off on a number of tangents, which is not surprising given the rather vague, open-ended original question. I suggested focusing on a carbon tax, since it has several advantages: 1) it's the elephant in the room, associated with the largest global damages that we know of; 2) it has the advantage of being easily measured; 3) at any moment in time, the marginal damage from any tonne of CO2 emitted anywhere by anyone is exactly the same; 4) many other, non-climate, more local damages are also associated with fossil fuels.

For simplicity and possibly for practical application, I further suggest NOT attempting to replace other taxes with a carbon tax, but making it revenue-neutral instead. This means simply collecting all the carbon tax revenue, then distributing it equally over the population. This completely removes any worry about declining government revenue because of the carbon tax "working itself out of a job" by promoting efficiency and renewables. However, I would not want to instantly impose a high carbon tax that fully reflects the marginal damages. It should be phased in over something like a decade. After that, the tax rate should be gradually increased over many decades, because marginal damages will increase as atmospheric CO2 concentrations go up over time.

In most countries, it's not plausible that the poor will persistently consume as much fossil energy per capita as the rich, if in fact they do now. Yes, the wealthy can and do pay for higher per-square-meter efficiency in their much larger houses. But the poor rarely fly around the globe to take a vacation. A single inter-continental flight easily cancels a year of careful conservation in all other individual activities.

If there is a distributional effect, I would expect it to benefit the poor in most cases, and perhaps income or consumption taxes should be adjusted to make up for that.

Back to the original question, what is "a" pollution or eco or natural resource tax? Those are three different things, and "a" tax is unlikely to address all of them efficiently. A Pigovian tax should be applied as directly as possible to each specific harmful activity, which in some cases can be difficult to isolate and monitor. A Pigovian tax can help fund the government, but that's not its main purpose. It does make sense to look for negative externalities, and tax those first, and then look at whether total tax revenue is enough higher that other taxes should be reduced.

The British Columbia carbon tax has attempted to address the regressivity issue, and our early assessment suggests they have succeeded. Their recycling focuses some of the funds on reducing rates for the lowest income tax brackets. Carbon taxes are likely to affect incomes as well as prices. There is less attention to that, but it is part of the picture too. Wages tend to be less negatively impacted than capital returns by climate measures, offsetting some regressivity.

Thanks, Randall. I'd like to know more details about how the BC carbon tax has worked. As a general note, dealing with a global externality one small state, province, or country at a time is not a promising approach, but it might be our only practical option, for demonstrating that costs are much lower than opponents would have us believe. At best, the piecemeal approach will lead to carbon "leakage" across borders, or additional costs for monitoring and preventing leakage.

In BC's case, leakage does not appear to have been a significant issue. Their exports are not particularly energy intensive. Because process emissions are exempt, the impact on the cement sector (where leakage can be a real concern) has been muted.

I think of leakage as mainly an import, not export issue. E.g., if BC cement plants were taxed on their carbon emissions, local cement prices would go up and more cement would be imported. If process emissions are exempt, that just means the tax is incompletely and inefficiently applied, not that there's no leakage problem. A solution could be to tax imports on their "embodied CO2," but that could be very difficult to calculate. If everyone taxed all fossil fuel carbon content as close as possible to the points of extraction, these problems would vanish.

Eco-taxes on inputs and outputs for which demand is elastic is not a bad idea, but energy taxes and taxes on other goods for which the demand is inelastic do more social harm than environmental good.  We might as well tax the air we breath!

Just a brief response about regressivity of carbon taxes. The partial equilibrium story has always been that C taxes are regressive because of energy shares in consumption. But if we take into account the general equilibrium impacts (effects on real wages, returns to capital and transfers) it isn't so clear. One thing in particular is that many lowest-income households rely heavily on transfers, which in some jurisdictions are fixed in real terms.

Everyone seem to get hung up on carbon taxes, or an individual tax  on a specific problem, It seems to me that what needs to be done is to completely revolutionise the taxation system, the whole lot from bottom to top.

This means in my opinion to take the responsibility  of choice from governments and let individuals choose , by their behaviour of being a consumer.

Consumption is the problem, and it is the reduction of consumption especially the most damaging ones that has to be achieved, This surely can be done by taxing heavily those resources that damage the environment the most. We are so dependant on the scientific community to guide us through this maze of , " what is the damage caused by any one resource".  The answer to this question has been very variable over the years and has been the subject of many debates, and subject to blackmail from corporations also.

That being said , I believe we have only this option left to us . if we are to make good headway quickly enough as we have already seen , there is little change in pollutants  that effect climate change, and with the prognosis very stark , surely we have to grab the nettle and do more fundamental changes.

Taking the regressivity issue of carbon taxes, I agree it is a problem , that is why we have to tax all natural resources , dependant of the damage they cause or potentially cause the environment, not just carbon dioxide directly but also to all the effects of all the micro flora and ecosystems at all levels of life. It is then that we will begin to make real headway into tackling the problem as a whole. Piecemeal choices of single specific taxes will solve nothing , as the consumer will readjust their habits to the new situation. and that is why it is so important to address the whole system to embody the whole of the planets planets resources and systems. 

This is the BIG challenge we face , Are we up to it? I

I believe we can make the change , and it has to eventually encompass the whole globe , not just the rich of today or tomorrow , but also the children of all our future generations 

This could help:

http://link.springer.com/article/10.1007/s10098-015-0923-z