The article in the url below is a useful and clear explanation of the benefits of a carbon tax as the most effective, immediate remedy to the challenge of climate change:
"The economics of climate change is straightforward. Earth is warming both because greenhouse gases are costly to eliminate and because governments have permitted people to emit them into the atmosphere without penalty. The classical remedy is a carbon tax, a fee on the carbon content of fossil fuels. Generally levied where fuels are extracted or imported, it discourages carbon emissions by making goods with larger carbon footprints more expensive. The World Bank reports that as of 2019, 57 local, regional and national governments have either enacted some form of carbon tax or plan to do so. When people must pay for their emissions, they quickly discover creative ways to reduce them."
One of the main barriers to the implementation of a carbon tax, of course, is the lack of political will. That is, politicians fear sponsoring anything that looks like a tax, based on the reasonable assumption that their voters will vote them out of office if they do so:
"Even with such gains in prospect, many legislators remain unenthusiastic because they perceive a carbon tax as being unpopular with voters. Many families have been struggling to make ends meet, they might say, and the last thing they need is a stiff new tax on energy use."
The most commonly-prescribed solution to this problem is to make the tax revenue-neutral. That is, each person would receive a monthly rebate that is (in theory) equal to their estimated carbon usage. The problem, of course, is how to accurately measure individual usage to ensure poorer families do not end up paying more in carbon taxes than they receive in rebates. As a potential remedy, the author of this article suggests a more progressive rebate system based on the uneven carbon usage by different income groups:
"Because the wealthy consume much more energy than others, they would contribute a disproportionate share of the revenue from a carbon tax. The top 10 percent of all income recipients account for almost half of carbon emissions worldwide, an Oxfam International study has found. Use patterns are less skewed in the United States, but here, too, the wealthy live in bigger houses, drive bigger cars and, at least when the pandemic isn't raging, take many more trips to distant destinations."
So, rather than try and calculate each taxpayer's carbon usage, this article suggests that simply giving everyone the same payment would amount to a net gain for those at lower income levels:
"Even with equal rebates per capita, most people would get a monthly check for more than they'd paid that month in carbon taxes. Rebates could, of course, be distributed in a more progressive fashion."
There is even an argument that higher income earners would still be better off, even though they would be net contributors to the carbon tax system:
"Although low- and middle-income families would be net cash beneficiaries under this plan, the wealthy would pay more in tax each month than they would receive in rebates. Even so, prosperous voters would also come out ahead, on balance. That's both because they would benefit disproportionately from the resulting reductions in climate losses and because they would otherwise have to shoulder much of the tax burden of climate adaptation measures. In short, compelling evidence suggests that a carbon tax would improve life outcomes for rich and poor alike."
This twist of a progressive rebate distribution is intriguing, and something I do not remember seeing before. The result could be persuasive to politicians with the creativity to frame it appropriately to their constituents:
"Had carbon taxes been widely adopted decades ago, the planet would not be facing a climate crisis today. Critics are correct that it is too late for this measure alone to defuse the climate threat. … But adopting a carbon tax even at this late date would greatly reduce both the cost of achieving climate stability and the time needed to achieve that goal."
Take care
David
David Chandler
© Sage Publications, 2020
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Behavioral Contagion Could Spread Carbon Tax Benefits
By Robert H. Frank
August 23, 2020
The New York Times
Late Edition – Final
BU5
