A group of 14 economists published a report Tuesday claiming that the world needs a $4 trillion tax on carbon dioxide (CO2) emissions to stop global warming.
The study suggests that a tax should be levied on fossil fuel use, taxing between $50 to $100 per ton of CO2 emitted. Proceeds could support green energy, given out as aid to poor countries, or be redistributed back to the population. The World Bank and French government financed the study.
Lord Nicholas Stern co-authored the report, having written a 2006 report that served as the basis of U.K. climate policy. Stern’s recommended tax would cost more than the total economic output of the U.K. or Germany.
“The revenue can be used to foster growth in an equitable way, by returning the revenue as household rebates, supporting poorer sections of the population, managing transitional changes, investing in low-carbon infrastructure, and fostering technological change,” reads the report. “Ensuring revenue neutrality via transfers and reductions in other taxes could be a policy option.”
Carbon tax supporters claim that pricing CO2 emissions are the best way to curb global warming, asserting that taxing CO2 is more efficient than setting up a cap-and-trade system or using regulations.
The report is consistent with Stern’s previous claims that a carbon tax would reduce emissions in an economically efficient manner.
“Governments, particularly the G20 nations, should commit clearly to the global agenda of sustainable growth and sustainable infrastructure in order to create the confidence that investors need in the overall direction of policies,” Stern said in an October interview. “The greenhouse gas market failure can be addressed through carbon pricing, implemented through carbon taxes, cap-and-trade, or regulation.”
Critics argue carbon taxes disproportionately harm poor people through higher energy prices.
A 2009 study by the National Bureau of Economic Research found that a carbon tax would double the tax burden on the poorest households, making it effectively impossible to have both a carbon tax and a living wage.
Only four countries — Ireland, Sweden, Chile, and Finland — have full-blown carbon taxation.
The largest economy to ever have a carbon tax, Australia, repealed it in 2014 after a landslide election put a conservative government in control.
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