The paper surveys the literature on environmental taxation in the context of the climate change problem. It reviews the use oftaxes as instruments of environmental management and notes the strengths and weaknesses of the applications. The performance of taxes relative to permits depends on the presence of uncertainty whose impacts are explored. The paper also reports on simulation studies concerned with double dividend implications of a carbon tax combined with a reduction in other taxes. The models for the EU find that a switch in taxation from labour to carbon/energy would increase employment, reduce carbon emissions and increase
GDP. [JEL Codes: H21, H23, Q54, Q58]
Keywords: taxation, environment, double dividend, carbon taxes.
- I would like to thank Professor Castellucci for comments, colleagues at Bath University, especially Professor Heady for joint work on which some sections of the paper are based, and Professor Smith from UCL for comments on a version that was presented in Copenhagen. All errors that remain are my own.