All carbon tax is inherently regressive but that's also trivially fixable. Make it revenue neutral and give every citizen a flat portion of the total collected revenue. Bam, it is now progressive, since on average richer people will spend more on fuel (and therefore the tax) even though it is likely a much smaller percentage of their spending.
Every single one of your ideas has problems that are solved by a carbon tax. Taxes are simple, they accomplish what you want, and they don't have loopholes. A carbon tax will _never_ have the unintended consequence of making emissions worse. Many of our current regulations, including the one I was responding to do exactly that because they actually cause people to buy larger trucks than they otherwise would with worse fuel efficiency.
A carbon tax might not on it's own be enough to solve the problem (especially if you set it to low), but no matter what level you set it, it will help. Thanks to unintended consequences, many of our current regulations are actively counter productive, while _also_ having negative economic and other costs.
All costs are regressive to people with less ability to bear them. By making them not regressive we don't change behavior! It doesn't matter if they're regressive if the objective is to get people to not drive or to burn less gas. Shifting the cost to the rich doesn't change behavior and it doesn't reduce actual carbon. There's a lot more low-income emitters than high income ones.
> Shifting the cost to the rich doesn't change behavior and it doesn't reduce actual carbon.
Shifting cost to the emitters is a better way to put it. If a factory can make 10m in upgrades over time to reduce their carbon tax burden by 15m over time, they are definitely going to do it. So I disagree: I say it does change behavior and it does reduce actual carbon.
> There's a lot more low-income emitters than high income ones
Whether that's true or not it does not mean a carbon tax would not 'reduce actual carbon'.
Drivers of ICE vehicles are the emitters.
An ICE vehicle sitting in a driveway with its engine off emits no pollution (that is, after the initial impact of manufacturing and delivering it).
The fuel/carbon tax would still be behavior-shifting for low-income emitters because it would still apply to low-income emitters per marginal unit, and that part is likely overall regressive because fuel is a larger expenditures for low-incomes.
However, the part where the resulting revenue is pooled and payed out in an equal amount back per capita is progressive, since that payment is a greater fraction of a low income. Desirably, it also means that low-income people emitting less than the average would make money overall: consider a household consisting of a single mom and two kids that take public transit to work/school.
It would change behaviour more, not less.
If you set the carbon tax at about $1/gallon of gasoline, the corresponding carbon rebate would be about $1000 per family per year.
That wouldn't affect rich people much; neither the $1/gallon nor the $1000 extra income is significant. But many rich people get rich by being penny-wise, so many would change behaviour, by buying an EV or similar.
But for poor people both $1/gallon and $1000 per year is significant. If gas was $1/gallon more expensive, poor people definitely would drive less.
The real hardship for the poor here is they cannot float that $1/gallon for a year before getting the $1000
The same thing happened with electric car purchase incentives in New Zealand. The poor cannot afford to buy a new car - so only the well off received the efficient car discount incentives.
The trickle down as those cars depreciated in value was years away.
That doesn’t really sound like the worst thing?
Someone has to buy them for full price before they show up on the used market 5-10 years later.
That doesn't make sense because the second hand car is not cheaper by the amount of the subsidy. Say subsidy is $20k, second-hand car might eventually be $6k cheaper (and the discount time value of money means that the $6k is actually less than $4k). Giving the wealthy person $20k, and the poor person less than $4k is strange.
New Zealand used car market is likely very different from the market where you are. The cheapest Model 3 I could find was a USD18000 for a 2020.
Subsidies make sense if the environmental gains outweigh the costs of the subsidies.
Subsidies: there was a purchase subsidy, charging stations were subsidised, and I think electric cars are not paying their fair share of road maintenance (much of our road costs are paid for by an excise tax on usage via petrol-tax or heavy-vehicle-milage).
That math doesn’t add up. If I buy a $100,000 car for $80,000, and I sell it to someone for $60,000, the recipient still gets a $40,000 discount.
And if you pretend that there is no subsidy, and the original owner paid $80,000 just because it cost that much unsubsidized, the second buyer still gets the same discount off the original purchase price.
So the fact that the car was originally subsidized isn’t relevant.
The context is about when cars reach the poor - your example of someone spending $60k is irrelevant.
A poorer person in NZ spends at most a few thousand on their car. The original retail price is nearly irrelevant by the time it gets to someone poorish (however maintenance/parts costs do matter for old cars).
The financial benefit of a discount mostly goes to the people that own the car while it depreciates as it trickles down.
Context: In New Zealand, the vast majority of people drive second hand cars (mostly imported second hand from Japan). A 20 year old car is regarded as newish in New Zealand. I am well off, so I have two second hand cars, my daily driver is 2006 I think, and I have a 1996 4WD for other stuff. New cars are only bought by the well off.
The rebate can be paid out more frequently than annually.
Having a carbon tax seems to be the most fair way to combat climate change; unfortunately in practice it is political suicide. Australia had a carbon tax in 2011 and was quickly repealed in 2014. Likewise Canada also implemented such a tax in 2019 and was repealed this year prior to their election. People like to say that they want to help the environment, but when it comes time to vote they vote against such policies.
The Australian implementation had a lot of problems. Instead of being (something reasonably loophole free like) a tax levied on fossil fuel consumption it was a scheme that applied to the 500 largest emitters. These emitters then (crucially) estimated their own emissions minus offsets and paid tax on that.
The issue with this is that it creates a whole parallel (and largely fake) carbon accounting world. Fake estimates, fake offsets, a complex web of compensating subsidies - but real public money.
The field of carbon taxes is tricky because we can imagine simple schemes which handle a few scenarios in a fair way (ok, fuel! we know how to tax that) but once you start thinking about agriculture or construction you quickly get into complex estimation. You then end up with armies of carbon accountants who spend all day looking for loopholes and rorts.
Canada ultimately repealed the carbon tax because it was used as a political cudgel against the Liberal party that enacted it by the Conservative opposition in a sustained fashion for several years.
Which is dismaying because carbon taxes are a conservative solution to this problem and IIRC the first political entities to suggest the implementation of them in Canada were Conservative.
At the end of the day you have a nontrivial amount of the population, and many in positions of power who just outright deny environmental concerns and climate change as an existential threat.
They aren't going to approach this problem in good faith and it isn't obvious what the solution to their nefarious influence on policy should be.
Canada's implementation had two problems:
1. The textbook implementation involves 3 parts: tax, rebate and tariff. Canada only did the first 2. They were in talks with Germany/EU to create a carbon tariff zone, but that never happens. Without the tariff the carbon tax is massively unfair to local producers.
2. The rebates were almost invisible. If they would have been cheques in the mail it would have had much more impact psychologically.
But I agree, the main problem was denialism and its use as a political cudgel. It should be hard to argue that carbon tax is stealing money when all of it is given back, but they successfully did that.
Broadly agreed. IMO the Canadian carbon tax had a marketing problem. It should have been called a Carbon Dividend. First, it would have replaced the negative connotation of the word "tax" with the positive connotation of the word "dividend -- and it would have been more accurate to how the program actually worked.
Second, and probably more important: the rebates showed up in your bank account with a description that didn't make the source obvious enough for laypeople. Had people seen monthly "CARBON DIVIDEND" credits in their bank accounts, they would have noticed.
It was never called carbon tax, but carbon pricing. It being knows as carbon tax was the result of of opposition efforts. The same efforts and results would have happened had it been called dividend or anything else.
In official communications it was called the Canada Carbon Rebate or previously the Climate Action Incentive
You can give the rebate based on prior year or estimated usage at the start of the year, and then repay at the end of the year if it was too much, like with healthcare subsidies.
Are you sure? Gas consumption is notoriously inelastic. West coast gasoline is already a dollar or more than it costs on the east coast. Do poor people drive less in California than in Florida?
Gas consumption is inelastic in the short term, but everything is elastic in the long term.
If you want proof of this, just look at what happens to sales of large vs small cars when the price of gas changes.
I think everyone drives less in California than in Florida. (Google says ~14,500 miles annually per licensed driver in Florida, versus ~12,500 miles in California.) Gas prices are a factor in this.
> By making them not regressive we don't change behavior!
I'm poor. I could get just the $X back as my carbon tax dividend and continue with my current lifestyle. Or I could make choices that emit less carbon, which will cost less since they don't have a carbon tax cost to them, and save an additional $Y on top of the $X I'm already getting.
What do I do?
A revenue-neutral tax (like GP proposed) could, in theory, change behavior. I don't know enough about human behavior to say how it would work in practice.
Let's say that instead of taxing carbon, we pay people a bonus for emitting a below-average amount of carbon (proportional to the amount that they are below average by). If the amount is in a certain range, it will be too small an amount for wealthy people to care about, but large enough for poorer people to do things within their means (e.g. carpooling) to try to get it.
The results would hit certain geographic areas much worse than others, and (if priced enough to change behavior) would also probably depress car sales, which are two reasons why the federal fuel tax has been flat for over 30 years.
Think about how much easier that is to game though.
The original suggestion could be collected at point-of-sale for carbon emitting products. Gasoline, airplane tickets (based on average for the flights), even electricity are easy to measure and charge at the point of sale.
In your example, the person has to prove how much they didn’t emit, which is way harder in practice, to get the credit.
Why tax the gasoline but then the airplane ticket and not the kerosene?
And similarly i would extrapolate to do we tax the buyer of electricity (which could be green sourced) or the manufacturer - the gas burner. Or maybe even at the first point of contact with the carbon source, the oil company.
I was making an analogy to a revenue-neutral carbon tax. That is tax all of those things, but cut every taxpayer a refund for an equal share of the revenue. This is ultimately identical to paying people for having below-average use.
> Let's say that instead of taxing carbon, we pay people a bonus for emitting a below-average amount of carbon (proportional to the amount that they are below average by). If the amount is in a certain range, it will be too small an amount for wealthy people to care about, but large enough for poorer people to do things within their means (e.g. carpooling) to try to get it.
So you're saying that the government should incentivize poorer people to sell one of the last bits of their functional autonomy for what would be trivial amounts? "We'll just hang onto to this for a bit until you decide to stop going anywhere or make friends at work".
You are correct that most consumption taxes are intrinsically regressive, but you can turn pretty much any consumption tax into a progressive one by simply taking the money and redistributing it at a flat amount per person.
I believe this would be more fair to children who are the ones who will be most impacted by climate change in the end.
I believe there are even some governments that use this approach, but many of them don't make it feel as significant as it should. You should get a big fat cheque in the mail every month as if you won the lottery.
It's hard to see any of this as "trivially fixable." Taxes are inherently political, politics are complicated, changing incentives on this scale are pretty much impossible in our political system.
"Taxes are simple... and they don't have loopholes" is not at all how taxes work in the US. Perhaps your imagined perfect carbon tax is simple, but a simple tax with no loopholes is not likely to happen. Everyone wants a break or exception, and many of the interested parties are powerful.
This is mixing two questions: whether a system can be elegantly designed and do the job without major market distortion, versus the question of whether various actors will stand in the way to prevent it.
You could say the same thing about zoning. Higher density is better for affordability, but faces opposition from landowning existing residents. Does that make it wrong, or not worth pursuing? No, and that particular movement seems to be getting traction despite the political opposition.
I read "trivially fixable" as "there is an elegant solution to this," not that "it is easy to get it politically passed."
As we learned in the 90s with email, an elegant solution that doesn't take human nature into account isn't worth pursuing. There used to be a joke checklist we'd send to each other about this.
> I read "trivially fixable" as "there is an elegant solution to this," not that "it is easy to get it politically passed."
The huge problem with this line of thinking is that it's easy to identify a half-dozen key players standing in the way of your elegant solution and it would be easier to remove them from the situation than change their minds. It's an attractive idea that can become a fixed idea.
^ In addition, I find it notable that the political party that is in favor of more regressive taxes is also against a carbon tax.
In an ideal world, I'd like the tax to be made more progressive, but I'll take anything!
I see the carbon tax as a 'stick' (to penalize undesired behaviour, in this case emitting carbon), but it needs to be coupled with a 'carrot' to encourage the desired behaviours.
I'd like to see a carbon tax coupled with massive investments to make public transit legitimately good. There are too many places where there is no viable alternative to driving, a carbon tax will unnecessarily punish those people without giving them a reasonable alternative.
The carrot is doing the things you want to do like getting from A to B or building a home.
Government ‘carrots’ are almost universally a terrible idea because they codify specific solutions. Instead you can get the same effect more efficiently with a carbon tax large enough for people to notice.
Finally, some common sense!
I'll boil it down to:
If you want less of something, tax it.
> since on average richer people will spend more on fuel
Why would you think so? People driving older cars, not being able to afford to fly - will certainly spend more money on fuel for their car.
Rich people use more energy. That’s been shown by loads of studies.
Maybe they drive a more efficient car, but they own much larger houses which are heated or cooled consistently, they travel a lot more, and they buy things with embodied carbon emissions.
Right, but now you're talking about adding the tax to the whole economy, not just car fuel?
That's close to impossible to implement. You'd need to track production and usage of everything in an extreme detail. Plus tracking all purchases (items + services) to a given person. So complete state surveillance of citizens. Globally.
> That's close to impossible to implement.
For a carbon tax, I think you only need to track imports, and domestic extraction of coal, petroleum, and natural gas.
„Only” track imports?
I think customs already tracks this. Smuggling oil and coal into the US at any meaningful scale seems very unlikely.
Tax all fuel. So those energy consumption of wealthy cost more?
Ok, let's assume you do. Let's tax all fuels 300% in the US. Now all manufacturing stops as your production costs are all over the roof. Everything is imported from countries that do not have these taxes.
What problem was solved here? None.
> Everything is imported from countries that do not have these taxes.
Finally a good use for tariffs!
Do you think flying evades the carbon tax?
Yes, if you apply the carbon tax only for the fuel at petrol stations. I am talking about realistic-to-implement solutions.
Aviation fuel is dispensed at a limited number of places; it would be easier (or just as easy) to implement a higher aviation fuel tax than a higher auto fuel tax.
It's trivial to implement auto fuel tax - it's already in place in most of developed countries.
There's an auto fuel tax in the US. Increasing that from $0.184/gallon for gasoline and $0.244/gallon for diesel to say $1.50/gallon and $2.00/gallon would ensure massive losses for that party in the next two or three election cycles.
Increasing the tax on aviation fuel to $2/gallon wouldn't produce massive shifts in the next several elections, therefore it's easier to implement.
We already have a carbon tax, you pay it when you buy the carbon. 3 cents per liter federally and an additional 18 cents per liter in California specifically.
This tax is only assessed on road transportation. It ignores aviation, industry, or any one of the other sources of carbon.
Some European countries have total taxes to the tune of 90+ cents per liter (50-60% tax) with current gas prices, for reference. (~65ct/l for the energy/carbon tax, specifically)
I don’t think that level is sufficient to cover the externalities.
> Make it revenue neutral and give every citizen a flat portion of the total collected revenue. Bam, it is now progressive,
Unfortunately, poor people don't have the cash on hand to hold them over until they get their Carbon Stipend on April 15th.
It's going to hurt poor people to charge them more at the counter, even if you give them more later. The stipend is just going to end up paying for less than the interest the tax created on a credit card.