SJSU Negative Effects of Carbon Taxes and How Could They Be Mitigated Research Paper


Complete a research paper on an Economic Topic related to Public Economics. 

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What are the negative effects of Carbon Taxes and how could they be mitigated?
The current situation with climate change had sparked a discussion for the best solutions,
when it comes to economics, science, and social norms. One of the popular proposed
government policy ideas is a carbon tax. A carbon tax would be an additional tax on
goods and services based on how much carbon dioxide the use or production of those
goods and services produce. Another proposed idea is to enact additional taxes on
corporations based on how much carbon emissions the businesses produce. The carbon
tax helps “price in” the externality of carbon emissions into the price of goods and
services, which do not get accounted for through the free market. Currently, more than 40
countries have enacted some form of carbon taxes. However, these taxes were not high
enough to create meaningful effect on carbon emissions. While most economists agree
that carbon taxes are efficient and effective at curbing carbon emissions and, thus, help
fight climate change, it’s a controversial political proposal. There are many concerns
about its effects on the quality of life of people who are of lower socio-economic classes
and on GDP. There are also a lot of questions about how high the taxes would have to be
in order to be effective to combat climate change and how to properly calculate carbon
emissions in order to tax them.
The overarching question that my research will address is, “what are the negative
implications of carbon taxes on society and the economy and how can those negative
implications be mitigated?” In my first phase, I will focus on the effects that carbon taxes
have on GDP. I plan on conducting this research by looking at statistical data from
countries, which already had enacted carbon taxes, such as United Kingdom, Ireland, and
Australia. I will study how the GDP growth rate of these countries had changed with the
introduction of carbon taxes. I will also make sure to adjust for other factors that might
have an impact on GDP growth rates, such as an unemployment rate, government
spending, other tax changes, etc… I plan on doing this research during the first week.
During the second week, I plan on reading other research that had been conducted on the
topic of how carbon taxes affect GDP growth rate. I will look at research that had been
conducted by different economists, financial analysts, and think tanks on the topic. I will
not look at research that had been conducted by political think tanks, since those often
have political biases that would make those sources less credible. Afterwards, I will
research if there are ways to mitigate slower GDP growth rate as a result of carbon taxes,
if my research will suggest that carbon taxes lead to a slower GDP growth rate.
In my second phase, I will focus on the impact of carbon taxes on inflation. I will conduct
this research using statistical data from countries that had already enacted carbon tax
policies and will also look at research that had been conducted by economist on this
topic. I will also examine potential factors that could mitigate negative effects on
inflation such as changing monetary policy and interest rates, if my research will indicate
that carbon taxes have a negative effect on inflation.
In my third phase, I will examine the effects of carbon taxes on the standards of living of
people who are of lower socio economic backgrounds. A lot of politicians and
economists are making an argument that carbon taxes are a form of a regressive tax,
where people with lower income have to be responsible for a higher tax burden than
people of higher income. In conducting this research, I will study statistical data that is
related to utilities, low cost foods, transportation, and rent or housing prices for the
countries that had enacted carbon taxes in order to see what effects carbon taxes had on
the prices of the type of goods and services that are mostly used by the poor as well as
what was happening with the income that people of lower socio economic backgrounds
were earning in the same time period. I would also look at whether or not the relative
poverty rate had increased in those countries. If my research would suggest that carbon
taxes have a negative effect on the standards of living of people in lower socio economic
groups, I would look at different policies that could potentially address those issues. The
three main policies that I would look at are tax exemptions from carbon taxes for goods
and services that are important for people who live in lower socio economic brackets,
welfare programs, and goods being provided or subsidized by the government. In order to
conduct my research, I will use statistical data, library resources and databases, and
research reports that had been created by different financial institutions and consulting
firms, such as Deloitte, Morgan Stanley, and Goldman Sachs.
I expect the results to be that Carbon Taxes have a negative impact on GDP growth rate,
inflation rate, and the standards of living of people in lower socio economic status.
However, I expect these effects to be small and significantly less than the economic cost
of climate change. I also would expect that these negative impacts of carbon taxes could
be mitigated through government spending and proper monetary policy. I believe that my
research would be valuable because carbon taxes have a potential to significantly reduce
carbon emissions, thus helping save and protect the environment and reduce the risks and
costs associated with climate change. However, many politicians and policy makers are
scared to enact such policies out of their concerns for the negative effects of carbon taxes
on the economy and the lives of their constituents. This research could help address those
concerns and offer ways of minimizing the negative effects of carbon taxes on society,
which would make carbon taxes a more acceptable policy by the public and policy

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public economics

GDP Growth

carbon taxes

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