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Getting Paid to Save the Planet

 

Photo: Alexander MillsPhoto: Alexander MillsThis week’s title is not a description of my dream-job.  It’s actually a way forward for all of us.  Too good to be true?   Stick with me and I’ll try to persuade you that I haven’t lost my marbles.

I’ll start where I left-off in my previous column: carbon-taxes are an effective way to encourage millions of people to find cunning ways to cut back on greenhouse gas emissions, but new taxation is generally about as popular as Boris Johnson at a Remain rally. 

New taxes are particularly resented when they are perceived as unfair.  This is a problem for climate-related taxes as they can have a disproportionate impact on those least able to pay.  If we make gas more expensive, struggling pensioners turn their heating off whilst the rest of us complain bitterly but carry on with our long, hot showers.  

The least significant producers of emissions cut-back and the worst polluters don’t change their behaviour at all!  That doesn’t sound promising.

So, should we forget taxes on carbon emissions?  That’s what our political parties have tended to do until now.  Economists may like the taxation approach but politicians run a mile because it’s a great way to reduce the number of people who vote for you.  

To be fair they tried - when the 'fuel-price escalator was introduced in the 1990s - but a few blockades by haulage companies were enough to push the emergency red-button on that particular moving staircase.

Somehow we need to retain the benefits of carbon taxation - economy-wide, economically-efficient emission reductions driven by the shared brainwaves of millions of people - without imposing new burdens on those least able to bear them.  

The solution to this conundrum turns out to be remarkably simple.  The revenue from the tax should be redistributed back to the population as an equal dividend.  So for example, if we taxed emissions at the rate of £25 for each tonne of carbon dioxide, this would bring in enough money to give every adult in the country an annual cheque of about £250.

But how does that help?  The consequence of the tax is that prices go up but, for the least well-off third of society, their costs go up by less than £250 and they are better off.  

The most affluent third of society, on the other hand, spend more money and the total increase in prices they see is more than £250.  They are a bit worse off.  At a stroke the burden is on the rich rather than the poor. 

Economic modelling suggests that the remaining third of the population see their costs going up by about the same as the dividend and they are unaffected.  

This approach is called 'carbon-fee and dividend' and it is already being used in Canada.  There’s also a Bill before the US Senate which, remarkably, has support from both Republicans and Democrats.  

The Left like it because it redistributes wealth.  The Right like it because it’s a market solution to global warming that allows massive deregulation (e.g. you don’t need to ban petrol cars if taxation has made them substantially more expensive to run than electric cars).

So why aren’t we looking at this in the UK?  Quite simply, because no-one here has ever heard of it. 

Had you before you read this column?  To find out more, check out https://citizensclimatelobby.uk/.  Spread the word - please.

 

22 May 2019

 

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