The Carbon Tax That Would Leave Households Better Off

The Carbon Tax That Would Leave Households Better Off The UNSW climate dividend proposal will be launched on Wednesday by the Member for Wentworth Kerryn Phelps. Shutterstock

Today, as part of the UNSW Grand Challenge on Inequality, we release a study entitled A Climate Dividend for Australians that offers a practical solution to the twin problems of climate change and energy affordability.

It’s a serious, market-based approach to address climate change through a carbon tax, but it would also leave around three-quarters of Australians financially better off.

It is based on a carbon dividend plan formulated by the Washington-based Climate Leadership Council, which includes luminaries such as Larry Summers, George Schultz and James Baker. It is similar to a plan proposed by the US (and Australian) Citizens’ Climate Lobby.

How it would work

Carbon emissions would be taxed at A$50 per ton, with the proceeds returned to ordinary Australians as carbon dividends.

The dividends would be significant — a tax-free payment of about A$1,300 per adult.

The average household would be A$585 a year better off after taking account of price increases that would flow through from producers.

If those households also cut their energy consumption as a result of the tax they would be even better off.

And the payment would be progressive, meaning the lowest-earning households would get the most. The lowest earning quarter would be A$1,305 a year better off.

Untaxed exports, fewer regulations

For energy and other producers making things to sell to Australians, the tax would do what all so-called Pigouvian taxes do — make them pay for the damage they do to others.

But Australian exporters to countries without such schemes would have their payments rebated.

Imports from countries without such schemes would be charged “fees” based on carbon content.

This means Australian companies subjected to the tax wouldn’t be disadvantaged by imports from countries without it, and nor would importers from countries with such a tax.

The plan would permit the rollback of other restrictions on carbon emissions and expensive subsidies.

Our estimates suggest the rollbacks have the potential to save the Commonwealth A$2.5 billion per year.

It’s working overseas

Our plan is novel in the Australian context, but similar to one in the Canadian province of British Columbia which has a carbon tax that escalates until it reaches C$50 per ton, with proceeds returned to citizens via a dividends.

Alaska also pays long-term dividends from common-property resources. The proceeds from its oil reserves have been distributed to citizens since 1982, totalling up to US$2,000 per person.

It could be phased in

We would be open to a gradual approach. One option we canvass in the report is beginning with a A$20 per metric ton tax and increasing it by A$5 a year until it reaches A$50 after six years.

The dividends would grow with the tax rate, but the bulk of households would immediately be better off in net terms and much better off over time.

And it would be simple

Our plan doesn’t create loopholes or incentives to get handouts from the government, as have previous plans that directed proceeds to polluters.

It will not satisfy climate-change deniers, but then no plan for action on climate change would do that — other than perhaps the governmment’s direct action policy, which provides a costly taxpayer-funded boondoggle to selected winners.

But for those who understand that climate change is real, our plan balances the important benefits we gain from economic development and associated carbon emissions against the social cost of those emissions.

It does it in a way that provides compensation to all Australians, but on an equal basis, making the lowest-income Australians substantially better off.

It is the sort of policy that politicians who believe in both the realities of climate change as well as the power and benefits of markets ought to support.The Conversation

About The Author

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW and Rosalind Dixon, Professor of Law, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Related Books

InnerSelf Market

Amazon

enafarzh-CNzh-TWdanltlfifrdeiwhihuiditjakomsnofaplptruesswsvthtrukurvi

follow InnerSelf on

facebook-icontwitter-iconrss-icon

 Get The Latest By Email

{emailcloak=off}

LATEST VIDEOS

Talking About Energy Change Could Break The Climate impasse
Talking About Energy Change Could Break The Climate Impasse
by InnerSelf Staff
Everyone has energy stories, whether they’re about a relative working on an oil rig, a parent teaching a child to turn…
Crops Could Face Double Trouble From Insects And A Warming Climate
Crops Could Face Double Trouble From Insects And A Warming Climate
by Gregg Howe and Nathan Havko
For millennia, insects and the plants they feed on have been engaged in a co-evolutionary battle: to eat or not be…
To Reach Zero Emissions Government Must Address Hurdles Putting People Off Electric Cars
To Reach Zero Emissions Government Must Address Hurdles Putting People Off Electric Cars
by Swapnesh Masrani
Ambitious targets have been set by the UK and Scottish governments to become net-zero carbon economies by 2050 and 2045…
Spring Is Arriving Earlier Across The US, And That's Not Always Good News
Spring Is Arriving Earlier Across The US, And That's Not Always Good News
by Theresa Crimmins
Across much of the United States, a warming climate has advanced the arrival of spring. This year is no exception.
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
by Alan N Williams, et al
The latest report from the Intergovernmental Panel on Climate Change (IPCC) states that without a substantial decrease…
A Georgia Town Gets Half Of Its Electricity From President Jimmy Carter's Solar Farm
A Georgia Town Gets Half Of Its Electricity From President Jimmy Carter's Solar Farm
by Johnna Crider
Plains, Georgia, is a small town that is just south of Columbus, Macon, and Atlanta and north of Albany. It is the…
Majority of US Adults Believe Climate Change Is Most Important Issue Today
by American Psychological Association
As the effects of climate change become more evident, more than half of U.S. adults (56%) say climate change is the…
How These Three Financial Firms Could Change The Direction Of The Climate Crisis
How These Three Financial Firms Could Change The Direction Of The Climate Crisis
by Mangulina Jan Fichtner, et al
A silent revolution is happening in investing. It is a paradigm shift that will have a profound impact on corporations,…

LATEST ARTICLES

Heatwaves Too Hot And Wet For Human Life Are Here
Heatwaves Too Hot And Wet For Human Life Are Here Now
by Tim Radford
Lethal heatwaves carrying air turned too hot and wet to survive are a threat which has arrived, thanks to climate…
How Dangerous Is Low-level Radiation To Children?
How Dangerous Is Low-level Radiation To Children?
by Paul Brown
A rethink on the risks of low-level radiation would imperil the nuclear industry’s future − perhaps why there’s never…
What We Do Now Could Change Earth's Trajectory
What We Do Now Could Change Earth's Trajectory
by Pep Canadell, et al
The numbers of people cycling and walking in public spaces during COVID-19 has skyrocketed.
Marine Heatwaves Spell Trouble For Tropical Reef Fish — Even Before Corals Die
Marine Heatwaves Spell Trouble For Tropical Reef Fish — Even Before Corals Die
by Jennifer M.T. Magel and Julia K. Baum
Despite the many challenges facing the world’s oceans today, coral reefs remain strongholds of marine biodiversity.
Warnings of Worse-Than-Usual Hurricane Season Point to Trouble Ahead
Warnings of Worse-Than-Usual Hurricane Season Point to Trouble Ahead
by Eoin Higgins
Hurricane season is about to start and its risks will only grow and potentially compound any impacts from the pandemic.
Australia, It's Time To Talk About Our Water Emergency
Australia, It's Time To Talk About Our Water Emergency
by Quentin Grafton et al
There’s another climate change influence we must also face up to: increasingly scarce water on our continent.
Fossil Fuels Are Heading Down, But Not Yet Out
Fossil Fuels Are Heading Down, But Not Yet Out
by Kieran Cooke
Renewable energy is making rapid inroads into the market, but fossil fuels still wield enormous global influence.
Human Action Will Decide How Much Sea Levels Rise
Human Action Will Decide How Much Sea Levels Rise
by Tim Radford
Sea levels will go on rising, because of human action. By how much, though, depends on what humans do next.