1. Skip to content
  2. Skip to main menu
  3. Skip to more DW sites
ClimateGlobal issues

Could a carbon tax help address the climate crisis?

Kiyo Dörrer
June 18, 2024

Burning coal generates cheap electricity - but also tons of emissions. So why not tax it according to the level of emissions? Many countries around the world have a carbon tax, so why is it not working?


Carbon Tax: A Simple Approach for Greater Climate Protection

The concept of a carbon tax is straightforward and effective: by pricing carbon emissions, fossil fuels become more expensive, making environmentally friendly alternatives more attractive. This creates a financial incentive to reduce CO2 emissions. To date, 27 countries worldwide have implemented such a tax.

In many of these countries, carbon tax revenues are used to lower other taxes or are directly returned to citizens, as seen in Canada, Sweden, and Switzerland. However, challenges and criticisms exist: the tax's implementation can be complex, and there is a risk that companies might relocate abroad to avoid it.

Besides the carbon tax, emissions trading allows companies to buy and sell emission allowances. CO2 emissions are capped by sector to ensure total emissions are limited. The emissions trading systems of the EU and China already cover a significant portion of global emissions.

The effectiveness of a carbon tax largely depends on its rate. Currently, prices in most countries are too low to have a significant impact. Experts estimate that an effective tax should be between 60 and 100 euros per ton of CO2. Political resistance is also a major hurdle, as new taxes are often unpopular.

Despite these challenges, the share of emissions covered by carbon taxes or emissions trading systems is steadily increasing. The carbon tax is seen as a crucial step in combating climate change. Successful implementation could significantly reduce global emissions and accelerate the transition to a more sustainable economy.

Kiyo Dörrer
Kiyo Dörrer Videojournalist based in Berlin.@KiyoDoerrer