Clausing: The Green Transformation And Tax Policy Criteria

Kimberly A. Clausing (UCLA; Google Scholar), The Green Transformation and Tax Policy Criteria: 

The principles of sound tax policy are highly relevant to climate policy evaluation; climate policy design features will have large consequences for fiscal balances, distributional goals, administrative complexity, and efficiency. Domestic climate policy adoption would ideally serve dual goals, both meeting domestic policy criteria and responding to the broader challenge of incentivizing global emissions reductions. The biggest hurdle in global emissions reduction is improving the incentives for ambitious climate policy adoption. In this regard, the move toward carbon pricing accompanied by carbon border adjustments can be a helpful step forward. Toward that end, countries should pursue greater policy alignment, including addressing the measurement and administrative challenges that carbon border adjustments entail. 

To avoid “green protectionism”, countries adopting border adjustments should do so only when there is a cost-imposing policy for which to adjust. Further, addressing the needs of lower- and middle-income countries is important; such countries have the most to gain from climate change mitigation, but they should not bear the brunt of mitigation costs. Governments can work cooperatively to address these issues; a global agreement in this policy space would be of great value. 

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