Carbon taxes tend to provide greater total benefits than many other energy conservation and emission reduction strategies, since they also yield co-benefits such as reduced congestion, road and parking costs, accidents, and sprawl.  Implementation costs are minimal, since most jurisdictions already collect fuel taxes, and it is estimated that each 10% fuel price increase reduces total automobile deaths by 2.3%.

Characterization: 

• As an economy-wide measure, carbon taxes have the potential to impact both passenger and freight transport.
• Carbon taxes can apply to all motorized transport modes, including aviation and shipping.
• Currently about 40 countries and 23 cities, states, and provinces put a price on carbon; together, these cover the equivalent of some 7 billion tons of CO2 – a threefold increase over the past decade. Removing subsidies and fully taxing carbon could reduce global CO2 emissions by 23%.
• By removing subsidies and taxing carbon, government savings in revenue/taxation could be raised to the equivalent of 2.6% of global GDP, which could be re-directed toward sustainable transport measures and other complementary SDGs.  Although fuel taxes are regressive, targeted tax reductions, cash rebates, and improved services for poor people tend to be extremely progressive, and revenue-neutral carbon taxes can also be progressive.

Status of deployment:

• At its COP21 launch, 21 governments and more than 90 business and strategic partners had joined the Carbon Pricing Leadership Coalition (CPLC).  On April 15, 2016, the CPLC agreed to advance global progress on carbon pricing systems, and to regularly report on said progress. It called for accelerated business support for carbon pricing policies, including through the use of internal carbon prices.
• A carbon tax of €15 per ton of CO2 was introduced in Ireland in 2010, covering most emissions from non-traded sectors (including transport), which has since increased to €20 per ton.  A tax of USD $5 per ton CO2 is scheduled to take effect in Chile in 2018. The proposed tax only affects electricity and does not apply to the transport sector.

Estimated Impact:

• Carbon pricing is based on the ‘polluter pays’ principle, i.e. it gives an economic signal which allows polluters to decide for themselves whether to discontinue their polluting activity, or continue polluting and pay for it, thereby stimulating innovations in technology and markets.Thus the impact of carbon pricing on transport CO2 emissions could be significant, with an estimated 0.5-10% reduction in CO2 emissions by 2030. High variation in emissions impact estimations may be due to assumptions involved in modes, market segment and carbon price.
• In the United States, a comparison of expected light-duty vehicle (LDV) emissions modeled with and without carbon pricing shows a 3% reduction in CO2 emissions and a 0.4% reduction in vehicle travel for LDVs.[1] In China, transport emissions mitigation could be in the range of 0.5-10% depending upon the carbon price, with significant air pollution mitigation co-benefits.In 2050, under a 10 ¥/ton CO2 tax scenario, the annual CO, HC, NOx, and PM emissions would be reduced by 0.68%, 0.66%, 0.55% and 0.49% respectively when compared with BAU. Under a 300 ¥/ton CO2 tax scenario, they would be reduced by 15.1%, 14.1%, 10.1% and 8.3%, respectively, compared with BAU.
• However, there is also evidence that if not planned properly, CO2 taxation could be far less effective than fuel and energy taxations, or could even impose negative consequences on economies throughout the automotive sector.However, if planned properly and if supported by additional complimentary policies such as the removal of fossil fuel subsidies, carbon taxes have a significant role to play in emissions mitigation, with potential for a global 23 % reduction in (economy-wide) CO2 emissions.