Étienne Billette de Villemeur (University of Lille, France) & Justin Leroux (Institute of Applied Economics, HEC Montréal), CO2: Tax Now, Pay Later!, 66 Tax Notes Int'l 49 (Apr. 2, 2012):

Regarding the climate change issue, a tax on greenhouse gas (GHG) emission flows (also dubbed the carbon tax) is arguably the most prominent instrument put forth to correct "the greatest market failure the world has seen" (Stern, 2008). According to the familiar Pigovian argument, the motivation behind carbon taxation is to make emitting GHGs expensive in order to induce a reduction in emissions.

We argue that the carbon tax as we know it suffers from fundamental shortcomings regarding its implementation, and we offer an alternative way to tax emissions that is free of these flaws. Our proposal relates to the timing of taxation: Instead of charging emitters today for the present value of the damage their emissions may cause, we should tax the emissions of countries over time — albeit at a lower rate — to reflect the environmental damage actually caused by their emissions. It turns out that this scheme, which we refer to as ex post taxation, is not only cheaper than the carbon tax but avoids the crucially problematic issues of predicting future climate damage and of having to settle the raging debate on how to account for the welfare of future generations. Moreover, it ensures that emitters are held accountable for the real damage incurred, rather than according to some indeterminate ideological stance on what may or may not happen.

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