Hsu — Volume 65, Issue 4

Carbon taxation has long appeared politically implausible due to public aversion to taxes and anti-climate-change misinformation campaigns, yet broad consensus among economists and climate experts identifies carbon tax as the most economically efficient, administratively simple, and effective method for reducing greenhouse gas emissions. Hsu argues that defenders of carbon taxation have failed to adequately address its revenue dimension, allowing critics to frame the policy in purely negative terms focusing on costs while ignoring benefits. The article presents a menu of revenue options alongside macroeconomic and distributional analysis of different approaches. Hsu contends that a robust carbon tax discussion must examine how revenues are used, because without clarity on revenue allocation, carbon taxation appears as an all-apparent cost with no offsetting gains. The Trump Administration's withdrawal from the Paris Agreement and rejection of the Clean Power Plan created new urgency for state-level climate policy, with proponents increasingly advocating for carbon taxation as a libertarian-aligned approach minimizing government intervention while leveraging markets. Hsu concludes with a "lump sum distribution" approach in which carbon tax proceeds are returned to carbon taxpayers on a largely per-capita basis, potentially insulating lower-income groups from energy price increases.

Topics: Tax Law · Environmental Law

Keywords: carbon tax · carbon dioxide emissions · greenhouse gases · climate policy · Paris Agreement · revenue options · libertarian values