Luxury Carbon Taxes on Household Consumption – A Comparative Study Across 88 Nations

Oswald, Yannick; Millward-Hopkins, Joel; Steinberger, J.; Owen, Anne; Ivanova, Diana

doi:10.2139/ssrn.4199632

Cited by 2 publications

(10 citation statements)

References 45 publications

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“…For the design of the luxury tax scenarios (T5) and (T6), we follow Oswald et al 17 , who set a lower tax level on necessity goods and a higher tax level on luxury goods based on expenditure elasticities but maintain the average carbon tax across goods at a certain level. (T6) combines the luxury consumption tax scenario (T5) and the nation-differentiated consumption tax scenario (T4), incorporating both country and sectoral heterogeneity.…”

Section: Carbon Taxation Design Determines Burden Among Expenditure G...mentioning

confidence: 99%

“…In terms of the carbon emission effect, when a carbon tax is implemented without recycling, a higher price tends to lower the real income of households and thus suppress demand, resulting in significant emission reductions. The luxury consumption tax (T5) has the greatest impact on reducing carbon emissions because it applies a very high tax level to price-sensitive carbonintensive products 17 . However, recycling the carbon tax revenue would cancel out the tax's emissions reductions.…”

Section: The Best Domestic Policy MIXmentioning

confidence: 99%

“…Under the nation-differentiated luxury tax scenario, 𝐶𝑇 𝑟 is equal to the tax level for country r in the nationdifferentiated consumption tax scenario (formula 5). In addition, 𝑒 𝑟𝑖 is the expenditure elasticity of sector i in country r, which is estimated by a log-log model 17 , log(𝐸𝑋𝑃 𝑟𝑖 ) = 𝑎 + 𝑏 × log(𝐸𝑋𝑃 𝑟 )…”

Section: Carbon Taxation Scenariosmentioning

confidence: 99%

“…This is due to poor households consuming proportionally more necessities such as food, energy and manufacturing goods that tend to be carbon intensive, even though in absolute terms the consumption of high-income households contributes the dominant share of carbon emissions [8][9][10] . A wealth of empirical evidence suggests that carbon taxation is typically regressive in highincome countries and progressive in low-and middle-income countries, implying that carbon taxation has varying side effects with respect to economic inequality [11][12][13][14][15][16][17] .…”

mentioning

confidence: 99%

“…Designing a tax revenue recycling mechanism to offset the negative impact of carbon taxation and even further help to improve other social goals may make it (more) politically feasible 19,20 . The performance of several mechanisms, such as a universal lump-sum transfer [21][22][23][24][25] or redistributing the tax revenue to specific low-income households (e.g., the poorest 40%) 17,22,26 , as well as international revenue recycling through a global climate fund 21,23,25,27 have started to be investigated. The idea of a global climate fund aligns with the fact that many developed countries have committed to providing official development assistance (ODA) to developing countries 28 .…”

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confidence: 99%

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A global just transition through carbon taxation and revenue recycling

Feng

Chen

Malerba

et al. 2023

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Carbon taxation is regarded as an essential tool for curbing carbon emissions but can be regressive and increase poverty, and moreover lacks universal acceptance among the public and policymakers. Recycling the tax revenue raised to vulnerable households is one promising solution to this issue. However, little is known about the best strategy for designing such a policy at the global level. This paper investigates the effectiveness of various carbon taxation methods and revenue recycling mechanisms in reducing poverty and inequality between and within countries. We find that the policy mix with the highest poverty reduction potential is implementing a consumption tax with higher tax rates on luxury goods and recycling revenue through expanded social assistance systems, in line with the expansion during the COVID-19 pandemic. While differentiating tax rates across goods within countries is advantageous, the average tax level across countries is best kept uniform since it potentially offers governments in low- and middle-income countries more financial capacity to support the poor. Furthermore, collecting a global climate fund from developed countries and redistributing it to developing countries based on poverty headcounts can further significantly reduce poverty and inequality within and between countries. However, substantial improvements in social assistance systems are urgently needed to further unlock the poverty-reduction potential of revenue recycling, particularly in Sub-Saharan African countries. Also, recycling carbon tax revenues to combat poverty and inequality will inhibit the emission reduction effect of carbon taxation in the short term, necessitating additional mitigation efforts in other areas.

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Section: Carbon Taxation Design Determines Burden Among Expenditure G...mentioning

confidence: 99%

Section: The Best Domestic Policy MIXmentioning

confidence: 99%

Section: Carbon Taxation Scenariosmentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

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A global just transition through carbon taxation and revenue recycling

Feng

Chen

Malerba

et al. 2023

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Carbon Pricing is not Unjust

Mintz‐Woo

2023

Global Challenges

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The aim of this perspective is to argue that carbon pricing is not unjust. Two important dimensions of justice are distributive and procedural (sometimes called “participatory”) justice. In terms of distributive justice, it is argued that carbon pricing can be made distributionally just through revenue recycling and that it should be expected that even neutral reductions in emissions will generate progressive benefits, both internationally and regionally. In terms of procedural justice, it is argued that carbon pricing is in principle compatible with any procedure; however, there is also a particular morally justifiable procedure, the Citizens’ Assembly, which has been implemented in Ireland on this precise question and has generated broad agreement on carbon pricing. It is suggested that this morally matters because such groups are like “ideal advisors” that offer morally important advice. Finally, an independent objection is offered to some ambitious alternatives to carbon pricing like Green New Deal‐type frameworks, frameworks that aim to simultaneously tackle multiple social challenges. The objection is that these will take too long to work in a climate context, both to develop and to iterate.

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Luxury Carbon Taxes on Household Consumption – A Comparative Study Across 88 Nations

Cited by 2 publications

References 45 publications

A global just transition through carbon taxation and revenue recycling

A global just transition through carbon taxation and revenue recycling

Carbon Pricing is not Unjust

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