A fairer and more effective carbon tax

Abstract

Given available technologies, current consumption behaviour is incompatible with the goal of keeping global warming below 2 °C. Economists present carbon pricing as the most efficient tool to induce people to adjust their consumption behaviour. This Perspective critically analyses the ethics, economics and politics of one key form of carbon pricing: carbon taxes are levied to discourage fossil-fuel-intensive consumption. The core claim of this Perspective is that progressive individual carbon taxes (that is, taxes whose rate increases the more emissions an individual generates) are not only more effective but also more just than the flat-rate carbon taxes prevalent today. Carbon taxes face several challenges in practice. This Perspective identifies three such challenges and suggests that, to meet them, carbon taxes should be designed like income taxes. The tax rate of a person should increase with the greenhouse gases the person emits through their consumption.