Environmental Taxation

Gülce Akkaya

1. Introduction

The global urgency to mitigate climate change has brought carbon taxation to the forefront of climate policy discussions. As a market-based instrument, carbon taxes are designed to internalize the external costs of greenhouse gas emissions by placing a financial burden on carbon-intensive activities.

S. 278However, the practical effectiveness of carbon taxation depends not only on its theoretical design but also on how it is implemented across jurisdictions. Countries vary significantly in their choice of carbon tax models, particularly along the axes of upstream or downstream application and explicit or implicit pricing. These differences reflect broader political, economic, and administrative contexts, and they directly impact the effectiveness of such taxes in reducing emissions. For instance, upstream taxes levied on fuel producers or importers offer administrative simplicity and broad coverage while downstream models may enhance transparency but often face enforcement challenges. Likewise, explicit carbon taxes provide a clear price signal per ton of CO₂ whereas implicit instruments, such as fuel excise duties, obscure the cost of emissions within general e...