Question: Why don’t we introduce a fiscal-neutral carbon tax, like that proposed by Prof James Hansen?

Why don’ t we introduce a fiscal-neutral carbon tax, like that proposed by Prof James Hansen? (See Tell Barack Obama the Truth – The Whole Truth.)

“A “carbon tax with 100 percent dividend” is needed to reverse the growth of atmospheric CO2. The tax, applied to oil, gas and coal at the mine or port of entry, is the fairest and most effective way to reduce emissions and transition to the post fossil fuel era. It would assure that unconventional fossil fuels, such as oil shale and tar sands, stay in the ground, unless an economic method of capturing the CO2 is developed.

The entire tax should be returned to the public, equal shares on a per capita basis (half shares for children up to a maximum of two child-shares per family), deposited monthly in bank accounts. No bureaucracy is needed.

A tax should be called a tax. The public can understand this and will accept a tax if it is clearly explained and if 100 percent of the money is returned to the public…”

It seems to that me this is a more effective strategy than a feed-in tariff for efficiency, renewables or even nuclear 

Alessandro De Maida



This question arrived while I was working on the article on carbon and energy taxes in Europe (see Carbon and energy taxes in Europe). Hansen’s proposal is very sensible – as one would expect. Either a carbon tax or a cap-and-trade scheme could be very effective.  However, the tax rate has to be high enough, and the cap low enough, to be effective, and this inevitably runs into political problems. Carbon taxes in Germany and the UK are too low to have had significant impact and the EU Emissions Trading Scheme has so far involved too many permits. Many commentators suggest that the cap-and-trade approach is more vulnerable to regulatory capture (that is, unduly influenced by bodies that would be hit by a low cap), but the evidence from European countries is that carbon and energy taxes are also vulnerable to this.

A great strength of Hansen’s proposal is that money should be returned to citizens. Equal rates for all is a sensible option, though even better would be spend some on reducing fuel poverty. Alternatively, other taxes could be reduced, which is the approach European governments have taken. However, the political problem now is that most governments are very short of money, so are unlikely to want either to reduce other taxes or to introduce a fiscally-neutral tax. So a carbon tax should be introduced in countries which don’t have one and substantially increased in those that do.  But some of the revenue must be used to help the fuel poor.

Stephen Tindale

Tags: ,  

Leave a comment

(all comments are subject to moderation)

Comments are closed.