Here’s what a carbon tax could mean for you | FT

FT economics commentator Martin Sandbu looks at what is needed to achieve a just transition to a low-carbon economy that safeguards public health and sustainable energy sources

If we needed a reminder of climate change the scorching summer europe just had in july was just a sort of extreme where the scientists say is becoming more frequent to bring carbon emissions under control more and more leaders now agree with one thing we must go further we must strive for more a two-step approach is needed to reduce co2 emissions by 2030 by 50

If not 55% the simplest way to do this is through a tax on carbon if carbon intensive activities and products become more expensive will consume less of them and emissions will be lower than otherwise but there is one big problem higher carbon prices can cause a big hit to the living standards of those already worse off that’s because poorer people often spend a

Larger share of their incomes than the rich do on carbon intensive things such as petrol or heating fuel when the french government tried to increase france’s carbon tax on transport fuel and heating oil the reaction from what became the yellow vest movement was explosive so here’s the dilemma we have to cut carbon emissions but the way to do so hurts the poorest

It seems we have to choose between climate catastrophe and social disaster what we need is a just transition to the low-carbon economy some french economists think they know how what we had in mind was just to show that it is possible to design a system by makes almost everybody in the first half of the population as well of or better off with the tax than without


That was the point this is how it would work when a driver fills up her car with petrol or diesel the price she pays is made up of two parts there is a cost of supplying the fuel itself then on top of that is tax linked to the co2 emitted while driving it is this tax that most economists thinks should go up to encourage people to reduce the use of fossil fuels which

Contribute to climate change while people in cities have the option of public transport if a carbon tax drives up prices at the pump people in rural areas often have no alternative to taking the car and often don’t have the means to change their car for a more fuel-efficient way but what if the tax instead of disappearing into the government budget was immediately

Returned to people in cash such a common tactic to be completely to be well-received by by people and also to be just it should be designed such that the revenues of the tax do not go into the budgets public budget general budget but they are kept to be redistributed to people to alleviate the the regressive effects let’s look at how this would work for a typical

Low-income family in france mario lives in a rural area with her husband and two children they’re not so well off their income is only in the second tenth of all households they use oil heating and have a diesel car in the scheme proposed by the french economists malians family would be paying 72 euros a month more in carbon taxes than a typical family in a midsize

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Town which has electric heating and no car that would be a big hit to their living standards if it was the whole policy but because manuel and her husband have low incomes they would also receive a carbon check worth a hundred and twenty-five euros a month put together this policy would leave the family with 630 euros more every year to spend the projects that’s

The ministry of finance needs money and so there are incentive to to to to put the tax and keep the money is very very strong and so it’s more there that there is a difficulty i think but i understand that it is not a financing tax it isn’t just an incentive to reduce emissions so they don’t have to keep the money the hope is that once vulnerable households see

That the policy makes them financially better off their opposition to higher carbon taxes will wane away with the climate emergency there’s no way around making carbon more expensive but it’s only if higher carbon taxes are also fair that there will be politically viable

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Here's what a carbon tax could mean for you | FT By Financial Times

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