Carbon Dividends: An Integrationist Approach

Abstract

Carbon pricing is often seen as an important tool for achieving a fast and deep decarbonization of the economy. However, its distributional impacts can also trigger strong opposition from the public. This has led many economists to argue in favor of recycling the proceeds of carbon taxation back to the citizens as an equal per capita dividend. This may increase its social acceptability, but is it fair? In this article, I examine two ethical cases for carbon dividends. First, it may be argued that people are entitled to equal shares of the revenue from carbon pricing by virtue of the common ownership of the Earth's absorptive capacity. Second, one may argue that carbon pricing imposes unfair burdens on individuals and that its impacts should therefore be rectified by recycling the proceeds as carbon dividends. However, I show that both arguments raise the problem of isolationism: they fail to adopt a broader perspective on the distribution of the overall package of costs and benefits. By contrast, I sketch what an integrationist defense of carbon dividends could be, based on the consequences of carbon pricing and revenue recycling for the overall situation of individuals.