Regulate Or Regress? The Legal–Economic Dichotomy In Carbon Tax Policy
- IJLLR Journal
- Jul 15
- 1 min read
Ansh Aditya, Shreshtha Singh & Himanshu Kumar, Symbiosis International University, Pune.
ABSTRACT
As climate change accelerates, carbon taxation has become a pivotal tool in the global decarbonization strategy. However, its implementation reveals a persistent dichotomy between legal mandates aimed at environmental regulation and economic concerns surrounding growth, competitiveness, and financial equity. This paper investigates this legal–economic tension by examining the theoretical, practical, and jurisdictional dimensions of carbon tax policy. Beginning with an overview of its economic rationale grounded in Pigouvian theory, the analysis assesses the policy’s real-world impacts— both beneficial and adverse. While empirical evidence supports its efficacy in reducing carbon emissions, trade-offs such as carbon leakage, sectoral imbalances, and inflationary pressures raise concerns about long-term economic sustainability. The paper further explores legal frameworks at international and domestic levels, including instruments like the Paris Agreement and India's nascent carbon market, to highlight how divergent regulatory structures influence economic outcomes. Cross-jurisdictional case studies from Sweden, Canada, and France demonstrate how success or failure often hinges on a jurisdiction’s ability to balance environmental obligations with economic realities. Ultimately, the study argues that the future of carbon taxation lies not in isolated regulation but in reconciling legal imperatives with economic pragmatism—through calibrated design, equitable burden-sharing, and responsive governance mechanisms that enable sustainable growth alongside climate responsibility.
Keywords: Carbon Taxation, Legal–Economic Dichotomy, Climate Policy, Pigouvian Tax, Carbon Leakage, Environmental Regulation, Sustainable Growth.
