Friday, September 11, 2009

Eco-Nomics: France Gets Serious About a Carbon Tax

Hooray for France! The Washington Post reports on this very good proposal by Nicolas Sarkozy. The economics of the thing is simple: a Pigovian tax is one that equates the market price of an economic activity equal to its private and social cost resulting in an efficient market outcome.

From the WaPo article:

The tax would be initially based on the market price for carbon dioxide emissions permits, which is now euro17 ($24.74) per ton of carbon dioxide, Sarkozy said. At that level, the government expects to raise euro3 billion, which will be entirely returned to households and businesses through a reduction in other taxes or repaid via a so-called "Green Check," Sarkozy said.

[HT: Greg Mankiw]

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