CARBON TAX

Colombia established its national carbon tax through Law 1819 of 2016. Taxpayers can obtain partial relief by cancelling certificates from verified domestic mitigation projects, including projects generating emissions reductions or greenhouse-gas removals. Results must be independently verified, and the certificates must be cancelled so that they cannot be used again. Since the 2022 tax reform, this mechanism cannot cover more than 50% of the tax otherwise due. Colombia therefore demonstrates how a carbon tax can create compliance value for verified removals while retaining a minimum direct tax liability. Most participating projects have nevertheless involved forestry and emissions reductions rather than durable engineered CDR.

South Africa’s Carbon Tax Act took effect on 1 June 2019. Covered companies may use eligible domestic carbon credits to reduce part of their tax liability through the national carbon-offset system. The first-phase design combined a headline carbon-tax rate with tax-free allowances of 60-95% and an offset allowance of 5-10%, leaving many companies facing an effective rate far below the headline figure. The case demonstrates how a national tax can create compliance demand and administrative infrastructure for carbon credits, but also how extensive allowances can weaken the investment signal. Offset eligibility does not establish that durable CDR methods are receiving material demand.

British Columbia introduced a broad provincial carbon tax in July 2008, demonstrating that Regional/State governments can independently establish and administer the instrument. The tax operated for more than sixteen years before the province reduced its rate to zero on 1 April 2025, following the removal of the federal consumer carbon-pricing requirement. Its repeal is as instructive as its introduction: even a long-running carbon tax can be reversed when its costs remain highly visible and political support deteriorates. The case establishes subnational competence and highlights the importance of distribution, public legitimacy and institutional durability, but it does not provide a precedent for using tax liability to support CDR.

Boulder voters approved the United States’ first municipal carbon tax in 2006, levied through electricity consumption to finance local climate programmes. In 2023, Boulder replaced it and an existing utility occupation tax with a consolidated Climate Tax, collected through electricity and natural-gas bills. The successor raises approximately $6.5 million annually for electrification, energy efficiency, resilience and nature-based climate projects. Boulder demonstrates that a municipality with appropriate taxing authority can impose a carbon-related energy tax, although it is charged on utility consumption rather than calculated directly per tonne of emissions and does not create demand for CDR credits.

Microsoft introduced an internal carbon fee in 2012, initially covering operational emissions and business air travel. Microsoft extended the fee to all Scope 3 emissions in 2020. The company measures its emissions and charges its business groups annually, using the proceeds to finance emissions reductions and carbon removals. Microsoft therefore demonstrates that Corporate/Industry actors can impose an internal carbon charge, adjust its rate and coverage, and connect the resulting revenue directly to CDR purchasing. It remains an internal management mechanism rather than a statutory tax: Microsoft cannot compel payment beyond its organisational boundary or create an economy-wide carbon price.