Carbon taxes can attract a lot of flak. On one hand, some groups hate taxes and are indifferent to climate change—in Canada, various provincial governments actively fought (and ultimately lost) against the federal government’s implementation of a carbon levy. On the other hand, some progressives worry that a carbon tax would hurt lower-income people by costing them more money.
According to new research, however, this doesn’t need to be the case. Noah Scovronick, a researcher at the Gangarosa Department of Environmental Health at Emory University and one of the paper’s authors, said that it’s possible to help reduce emissions while also implementing a carbon tax that redistributes wealth to people on the lower side of the socioeconomic spectrum.
And that’s good news, as carbon taxes are already in use. According to the World Bank, in 2020, around 40 countries and 20 cities, states, or provinces already have some kind of carbon-pricing mechanism. The United States has, occasionally, mulled over the idea of implementing one itself. “[It] does have a history in terms of being endorsed by a number of politicians and/or economists as a sort of—I don’t want to say straightforward—but one of the potentially more straightforward ways you could approach emissions reductions,” Scovronick told Ars.
Environment and equality
The primary way a carbon tax could be used to generate equality is by taking the funds it raises and redistributing them to lower-income people. According to Mark Budolfson—one of the new paper’s authors and a researcher at Rutgers University’s Department of Environmental and Occupational Health and Justice—this can be an effective tool in reducing poverty. He noted that the Canadian province of British Columbia, for instance, has been fairly successful in this regard.
The paper suggests that this mechanism could be rolled out around the world to help reduce inequality and that poorer people in poorer nations would benefit the most from it. “Some of the largest improvements in well-being would happen if this were done in developing countries,” Budolfson told Ars.
In the paper, the researchers divvied the world up into 12 regions. Some of these are particularly large, populous countries like India and the United States, while the rest are groupings of other smaller nations. Ideally, in the future, research will look at this at a country level—“The next generation of models will represent, I think, typically all nations individually,” he said.
Within the 12 groupings, the model breaks the populations down into five quintiles, representing different levels of wealth in each country or region. According to Budolfson, unlike previous models of its kind, the one they’ve developed can quantify the distinctions between the impacts of a progressive carbon tax on, for examples, wealthy and poorer people in India. “It’s the first one that represents inequalities within regions of the world,” he said.
In all, the research found that, if all the countries adopted carbon taxes at a high enough level, the world could limit warming to 2° C. This, in turn, also helps vulnerable populations around the world, who are particularly susceptible to the effects of climate change.
The paper also found that implementing progressive carbon taxes can be fairly straightforward—though some countries might currently lack the administrative capacity to do so, and others might not want to—which can help alleviate poverty. A research brief on the paper also notes that the positive effects of a progressive carbon tax can still be seen even if some of the money is lost due to things like administrative costs or if some of the funds are used to pay for other government programs.
According to Scovronick, a progressive carbon tax isn’t the only way to combat climate change while reducing poverty. But it is a fairly straightforward way to do so. Other ideas could and probably should be explored in more detail in the future, he said.