Comments on: How to compensate consumers under carbon pricing

By: JonHocut

JonHocut — Fri, 04 Dec 2009 20:25:53 +0000

The dividend check is the way to go. And the tax on gasoline wouldn’t be $3 per gallon, closer to $0.10 per gallon. Carbon neutral just isn’t that expensive. See this study in New Scientist on affordability.
http://www.newscientist.com/article/mg20 427373.400-lowcarbon-future-we-can-affor d-to-go-green.html

By: Charles Komanoff

Charles Komanoff — Tue, 29 Sep 2009 17:25:36 +0000

Felix — Why not go the “dividend” route, with every American getting a quarterly check equal to 1/305,000,000 of the prior quarter’s carbon tax or permit revenue? Clean, simple, and arguably at least as fair as any other distribution?

By: Ken

Ken — Tue, 29 Sep 2009 00:40:16 +0000

I agree with drewbie. The compensation for consumers is not having to tread water (with apologies to Bill Cosby).

By: caveat bettor

caveat bettor — Mon, 28 Sep 2009 21:18:30 +0000

Felix: Given your thinking, would you also be a proponent for educational vouchers and healthcare vouchers?

By: Sandrew

Sandrew — Mon, 28 Sep 2009 18:23:01 +0000

I see no good reason (outside realpolitik) to conflate a carbon tax with a proposed “offsetting” tax break. They are two different policy issues. If you the sell the carbon tax on the premise that it is paying for some other tax break, people will mentally merge the two as a single issue. When you do that, people will naturally think of the fairness of a carbon tax in terms of the net impact of tax and offset. In a farcical world where fairness is the status quo, this would walk you down a path to where each individual’s carbon taxes would be exactly offset by a “carbon tax tax credit,” completely defeating the purpose of the tax.

I second Dylan’s comment. A fair carbon tax is one borne in proportion to how much carbon you consume on an absolute basis, not on a relative-to-your-neighbor basis. Whatever we would do with the incremental tax revenue should be justifiable independent of the source of the funds. Returning that revenue to individual taxpayers in proportion to how it was raised is pretty much the dumbest way to spend it to my eyes.

By: Anand

Anand — Mon, 28 Sep 2009 16:14:59 +0000

Felix,

You will be happy to know that Waxman Markey has exactly this provision, where the consumer is actually paid back a per household sum irrespective of their consumption. Your point on multiple power sources is a good one, though the setup costs are sufficiently high (typically in the thousands of dollars to add gas if all you have is electricity) that it may not be financially prudent. Additionally, people with multiple sources of energy tend to be typically affluent, and therefore, they consume more energy than the average household. So, it is unlikely to be a significant effect. The question I have is regarding the mechanics of sending the money back to consumers. If it is part of the electricity bill itself, then the price signal is lost. It has to be a separate check that gets sent to the consumer. If you are interested in the actual estimates of your electricity bill increase, please see carbonfinanceandtrading.blogspot.com

By: drewbie

drewbie — Mon, 28 Sep 2009 15:56:18 +0000

giving credits would completely defeat the purpose of the tax. It takes away any incentive for an individual to become more efficient.

By: Victor Galis

Victor Galis — Mon, 28 Sep 2009 15:46:47 +0000

I think it’s really simple in countries that have a national sales tax. You just impose a carbon tax (or equivalent) then use the money to refund the sales tax. In essence you replace a tax on value with a tax on negative externalities. I’m not so sure what to do in the US.

By: Casper Lab

Casper Lab — Mon, 28 Sep 2009 09:37:44 +0000

We still seem to obsess with an atmospheric accounting system. What about water and land pollution ?

By: a

Mon, 28 Sep 2009 08:43:50 +0000

Given the amount of revenue the U.S. will have to raise in the coming years, maybe we should put aside the idea that, in order to attenuate the retrogressive effects of a carbon tax, the U.S. should give some money back. If you want progressiveness, put in a carbon tax *and* higher income tax rates.

By: KenG

KenG — Mon, 28 Sep 2009 03:43:36 +0000

Let’s say there’s a $3/gallon tax on gasoline, which makes it very expensive, especially for those in the lower income bracket. Increase the personal exemption to $15,000, that should make up for the taxes they will pay. Or make mass transit free. Or both. That will piss off people living in rural areas, but they already get enough subsidies anyway (electricity, phone, cable TV, water – basically everything that has to be brought to them on a wire or a pipe).

Increase the tax on heating oil and natural gas, and subsidize heating that uses renewable energy.

We could do a lot to really drive change in our fossil fuel consumption, but we don’t, because it will cause pain for the incumbent energy providers. But so what? What are they doing for the rest of us that they deserve such protection? Let them adapt like everybody else has to.

By: Dylan Thurston

Dylan Thurston — Mon, 28 Sep 2009 02:42:20 +0000

I’m confused by your examples, because the point of a carbon tax is ultimately to change behaviour, including behaviour of consumers; we should be encouraging people to have roommates and live in cities, to the extent it helps carbon reduction. Your example is needlessly complicated by referring to single mothers of three, who naturally already get tax benefits relative to your college roommates.