Types of Carbon Taxes

• Non-revenue neutral carbon tax -

  • Carbon-based fuels taxed at a set rate (per tonne of CO2 equivalent) either upstream (well head, mine or point of entry), midstream (electric utilities) or downstream (energy-using industries, households or vehicles)

  • Some or all of the revenue raised through a carbon tax are used for government programs, and the rest may be returned to households or corporations.  

• Revenue-neutral carbon tax - all of the revenue raised through a carbon tax are not used for government programs (except administrative costs); revenues are recycled back through tax cuts or dividends

  • Fee and Dividend - revenue raised through a carbon tax or fee is returned to households on a per capita basis through regular dividends

“What is a Revenue Neutral Carbon Tax” by Stuart Collins explains how this type of a carbon tax would work.