economist.com

Can progressive carbon taxes help alleviate poverty?

With unsustainable industrial development and unfettered capitalism driving climate change, it is no surprise that income inequality and carbon inequality are intrinsically linked. The latest report from the Intergovernmental Panel on Climate Change (IPCC) highlights the indisputable inequitable human impacts of climate change. Can climate policy interventions like carbon taxes address the complex and interconnected nature of global warming and wealth? 

More money, more carbon

Research shows that the richest 1% are responsible for twice as much carbon pollution as the poorest half of humanity. Yet those living in low-income areas and who are already facing the multidimensional burdens of poverty will bear the brunt of the impacts of climate change.

The 2022 World Inequality report further emphasises the notion of “carbon inequality”, finding that global greenhouse-gas (GHG) emissions are concentrated amongst a small percentage of people: the top 10% of emitters are responsible for close to 50% of GHG emissions. As the findings show, this is not necessarily a “rich” vs “poor” country problem, as there are high emitters across all regions. Those high emitters, however, are almost always part of a high-income earning bracket. 

If carbon taxes are effectively redistributed, they can fund policies that address both the social and environmental implications of climate change.

Can progressive carbon taxes help tackle carbon and income inequality?

Instruments like carbon taxes are essential to curbing emissions—something The Economist has argued for years. Some believe, however,  that these types of policy interventions can be regressive, and end up disproportionately burdening low-income communities and small businesses while allowing richer, high-emitting individuals and corporations to continue to pollute—as long as they can pay. These concerns sparked the now infamous 2018 “yellow vest” protests in Paris. 

Fortunately, if carbon taxes are effectively redistributed, they can fund policies that address both the social and environmental implications of climate change. Analysis shows that if every country adopted a uniform global carbon tax and returned revenues to citizens on an equal per-capita basis, it is possible to limit global warming to 2 degrees celsius by 2100 above pre-industrial levels. This type of redistributive carbon tax would also increase wellbeing, reduce inequality and could alleviate poverty across the world.