What Countries Have A Carbon Tax?

Manan Sethi Manan Sethi    16 June 2022
What Countries Have A Carbon Tax?

All over the world, Carbon Taxes are implemented to compensate for the pollution being spread by large corporations and industries that are being produced and released all over the Earth. According to the recent International Panel of Climate Change (IPCC) report, the world is well toward reaching a 1.5 degrees Celsius temperature increase by 2040. To slow global warming, many developed and developing countries have pledged to reach net-zero emissions by 2050.

To achieve this goal, governments all across the world are regulating emissions outputs and encouraging transformation towards electric transportation. Financial incentivization and economic mechanisms have also begun playing a bigger role in environmental protection.


One of the financial tools used to combat industrial emissions is the Carbon Tax. The carbon tax is the direct tax levied on large industrial corporations on greenhouse emissions per tonne to financially incentivize them to employ cleaner and more efficient environmental practices.

Other economic mechanisms such as a cap-and-trade system or emissions trading scheme (ETS) can be imposed in place of a carbon tax, where governments would cap the amount of greenhouse gas emissions released into the atmosphere every year based on carbon credits. The method of Carbon Credits is a method famously employed by the US government where clean energy companies like Tesla earn billions selling their carbon credits to companies like Chevron and Toyota.

However, these financial incentives might not be enough to deter industries to reduce carbon emissions. Many have suggested adopting a carbon border tax, which would apply a charge on imported goods produced in countries with weaker emissions regulations. A cross-border carbon tax would help make industries and businesses in countries that have higher carbon prices competitive against oversea businesses.

The 27 countries with significant carbon tax include

Argentina, Canada, Chile, China, Colombia, Denmark, The European Union, Japan, Kazakhstan, South Korea, Mexico, New Zealand, Norway, Singapore, South Africa, Sweden, the UK, and Ukraine.
Countries that are likely to implement a carbon tax include- Brazil, Brunei, Indonesia, Pakistan, Russia, Serbia, Thailand, Turkey, and Vietnam.

Furthermore, there are 64 carbon pricing initiatives currently in force across the globe on various regional, national, and sub-national levels, with three more scheduled for implementation, according to The World Bank. Together, these initiatives have been estimated to cover 21.5% of global greenhouse gas emissions in 2021.

Countries with the highest carbon tax include- (in US$ per metric ton of CO2 Equivalent)
Sweden (137), Switzerland (101), Liechtenstein (101), Norway (69), Finland (62), and France (52)


The European Union has one of the best examples of a cap-and-trade system, called the EU Emissions Trading System. Importers of emissions-intensive goods have to pay a charge based on what producers would have had to pay under EU carbon emission regulations. As of September 2021, the price of carbon per tonne in the EU program is at 62.45 Euros and continues to rise.

As of July 2021, in the proposed EU green deal, the legislative bundle proposes the world’s first carbon border tax, also known as a carbon border adjustment mechanism. The cross-border carbon tax will place a levy on imports of materials including steel, aluminum, and fertilizer from nations and foreign companies with laxer environmental rules. The bloc hopes to protect local businesses in countries subject to emissions-reducing regulations by charging goods and materials imported from carbon-intensive businesses and countries.

Many EU trading partners like Russia and the USA have lodged complaints against this proposal claiming that they will lose money from the deal.


China recently launched its national emissions trading scheme, making it the world’s largest carbon market. On the first day of its opening on July 16, the market saw 4.1 million tonnes of carbon dioxide quotas worth USD$32 million traded. China is rooting for market-based mechanisms to reduce carbon emissions and help the nation reach the net-zero emissions goal by 2060.


The United States is one of the most notable omissions from the list, especially given that it is one of the world's major carbon polluters. While President Joe Biden has made a strong push for his clean energy agenda since taking office – pledging to cut US emissions by half by 2030 and reach zero emissions by 2050, as well as signing an executive order mandating that half of all new US cars be electric by 2030 – he has notably failed to include any carbon pricing initiatives or schemes in his clean energy plan. The White House generally ignored Democrats' plan to impose a carbon border fee.At the moment, only a few subnational carbon initiatives are implemented in the US, namely a cap-and-trade program in California and an ETS in Massachusetts.


Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax

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