1 – Tax
2 – Reiceve back
3 – Enjoy
Climate change is a market failure
Everything has a price. Economically speaking, climate change is a market failure. Emitting GHGs has a cost (climate change), but that cost is not included in the price of the goods and services that cause the emissions. People fly, drive cars and overuse A/Cs because it has no price: we do not have to pay for the damage we cause. That is where a climate tax comes in: to resolve the market failure by attaching a price to the damage caused by climate change in form a tax on GHG emissions.
A climate tax puts cost to pollution
A climate tax is a tax just like VAT (value added tax), that we pay at the point of purchase, included in the price of the good/service, on all purchases we make. However, a climate tax is a tax not levied on all purchases like a VAT. It is only applied to fossil fuels and other GHG active substances and activities. The level of taxes is determined by the amount of CO2 emissions generated per unit of sold energy or substance.
A carbon tax is widely regarded as the best solution to reduce emissions amongst economists. In the US alone, 27 economist Nobel Laureats and 4 former heads of the Fed are supporting a carbon tax.
Higher energy cost = higher efficiency = lower consumption
The tax increases the cost of energy intensive goods and services (e.g. fuel, flying). This is an incentive to use less of the now more expensive goods/services. It triggers efficiency. And with that, lower emissions.
Climate dividend: returing the tax revenues to the people
However, for people with limited income, a hike in e.g. fuel cost can be disastrous – they might not be able to afford to go work anymore, as the yellow-west protests in France have shown, in particular in the absence of an affordable alternative to gasoline fuel. In addition, increasing the cost of GHG emitting fuels alone will not reduce emissions as fast as is required.
For this reason, individuals have to be compensated for the increasing energy cost. Simultaneously, we have to develop an affordable GHG-free alternative.
This is why 50% of the tax revenues will be paid back to individuals in cash; to compensate for the increasing energy bill and potentially increasing cost of goods.
The climate tax finances a cheaper and GHG-free alternative to fossil energy
40% of the tax revenues will be used to finance the rapid development of a renewable energy infrastructure. The new renewable energy infrastructure provides a cheaper alternative to fossil fuels, and will reduce emissions fast.
The proposed climate tax will reduce GHG emissions to Zero by 2035, while reducing the total global energy bill by 2% of World GDP
The Global Climate Tax Scheme (this website)
“Changing Climate Change“, feasibility analysis and impact evaluation of a global climate tax by SolABilty (this website)
Carbon Tax (Wikipedia)
“The Case for Carbon Dividends“, Climate Leadership Council
Economist’s Statement – why 27 economist Nobel Laureats are suporting a carbon tax