Emissions Taxes and Energy Taxes
Two other types of taxes that are related to carbon taxes are emissions taxes and energy taxes.
An Emissions Tax on GHG emissions requires individual emitters to pay a fee, charge or tax for every tonne of greenhouse gas released into the atmosphere while,
An Energy Tax is charged directly on the energy commodities.
In terms of mitigating climate change, a carbon tax, which is levied according to the carbon content of fuels, is not a perfect substitute for a tax on CO2 emissions. For example, a carbon tax encourages reduced use of hydrocarbon fuels, but it does not provide an incentive to mitigate or improve mitigation technologies, e.g. carbon capture and storage.
Energy taxes increase the price of energy uniformly, regardless of the emissions produced by the energy source (Fisher et al.., 1996, p. 416). An ad valorem energy tax is levied according to the energy content of a fuel or the value of an energy product, which may or may not be consistent with the emitted amounts of green house gases and their respective global warming potentials.
Studies indicate that to reduce emissions by a certain amount, ad valorem energy taxes would be more costly than carbon taxes. However, although CO2 emissions are an externality, using energy services may result in other negative externalities, e.g., air pollution. If these other externalities are accounted for, an energy tax may be more efficient than a carbon tax alone.
Fee and Dividend is another type of tax, where the money collected from the tax is returned equitably to all households, effectively taxing carbon emitters and rebating those that burn less carbon.
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