Carbon tax in an evolving carbon economy: policy design & digital innovations
United Nations Development Programme (UNDP), Innovation and Sustainable Development
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Abstract: This comprehensive report by UNDP explores the integration of carbon taxes within the dynamic landscape of the evolving carbon economy, emphasizing digital innovations and inclusive policy design. It outlines two primary carbon tax models?upstream and downstream?and compares their policy, regulatory, and administrative implications. The study underscores the potential for digital technologies (including AI, blockchain, IoT, and MRV platforms) to streamline emissions tracking, optimize tax collection, and enable integration with domestic and international carbon markets. Several country case studies, such as Singapore, Chile, Colombia, and Sweden, illustrate how varying regulatory frameworks and political conditions affect carbon tax implementation. The report presents a strategic policy framework addressing equity, competitiveness, and revenue redistribution challenges, especially in LMICs. It advocates for phased tax rates, socio-economic safeguards, and digital platforms to enhance transparency and efficiency. Additionally, it examines linkages between carbon taxes and offset mechanisms under Article 6, highlighting tools like DMS and national registries.