January 17, 2020

TAX WHAT YOU DON'T WANT:

It's time to scrap APD and bring in a carbon tax (Jethro Elsden, 1/17/20, CapX)

This is clearly far from an optimal situation. In building a tax system you should aim to bake in as few distortions as possible. It should be as broad and low as possible - ensuring that you don't encourage or discourage one activity relative to another. Of course, when there are externalities, such as with the environmental impact of carbon dioxide emissions, then you may want the tax system to change behaviour, by encouraging more environmentally friendly travel, for example.

In order to eliminate the numerous distortions in the UK tax system, while also allowing us to incentivise the market to solve environmental issues, we need tax on carbon emissions. Ideally this would cover the entire economy, and be levied as far upstream as possible on every activity that involved the emission of greenhouse gases, creating a strong incentive to develop less carbon intensive products and processes.

Posted by at January 17, 2020 12:00 AM

  

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