What does direct pay to poor citizens have to do with climate change? I've always been told that the best way to do a pigovian tax is to make it revenue neutral. You collect the sin tax, but then your redistribute it based on the average level of tax collected. So someone who uses exactly the average amount of carbon sees no change in buying power. Someone who uses less than average actually sees an increase in buying power. And anyone who uses more than average sees a decrease.
The idea here is to allow the cost of decisions to be felt in the wallet, but not hurt the spending power of those who are making climate-conscious purchasing choices.
Actually, the plan was to redistribute part of the collected tax back to the population. You would get each year a certain amount of money. If you do not emit CO2 (i.e. do not drive, do not fly, have a clean heating system), you would actually earn money.
Evenly distributing the revenue assumes the effect of the negative externality (climate change) is evenly distributed. But climate change tends to harm poorer people more than richer people, so it makes sense to distribute more revenue to them.
Distributing the revenue is not about compensating for harms. It's about ensuring that you don't have a net impact on people who are using the typical amount of energy. The idea is that the tax captures the externalized costs of economic actions, like emitting carbon. Once the cost of the actions is fully priced in, it is reasoned, consumption will decrease to the optimal level given the harm done by consumption.
The biggest problem with this idea is that we don't really know what the costs are going to be.
In practice, poor people would be beneficiaries of a externality-capturing tax, because by and large, rich people use a lot more carbon. More flights, bigger cars, bigger houses, etc.
You're right that you don't need to compensate for harms with such a tax (so my first sentence was imprecise). But I also don't see what's wrong with attempting to distribute (some of) the revenue in such a way to compensate for harms.
> But I also don't see what's wrong with attempting to distribute (some of) the revenue in such a way to compensate for harms.
It becomes a big political fight over how much of the revenue should be directed to social programs, so the tax policy changes every 4 years. A straight rebate gets wide support and taking it away becomes more and more unpopular as people get used to receiving it.
No, redistribution is organized extortion. I make $100, the government takes $50 of it, pockets $30 of that, and then redistributes $20 to those that will keep them in office (A.K.A. a bribe).
It depends on the implementation. Such a policy would certainly decrease carbon output. However, it's practically not possible to eliminate all carbon output immediately. For example, if you ban ICE cars (or impose a heavy tax), richer people who can work remotely or own electric cars would be less affected than poorer people who cannot work remote or afford such a car.
The purpose of such a tax would be to prevent climate change by discouraging "needless" activities. Want to take your 10th vacation this year by flying 500 miles? Maybe if the ticket was $20 more expensive that prevents some people, at the margin. If such a tax is gradually increased each year and alternatives get cheaper each year (direct carbon capture, electric cars, renewable energy), then eventually a society will be carbon-sustainable with much less harm to the people at the bottom of the ladder.
> I've always been told that the best way to do a pigovian tax is to make it revenue neutral. You collect the sin tax, but then your redistribute it based on the average level of tax collected.
You were lied to. The best sort of pigovian tax scheme, you collect the tax from those that can pay it. And use the money to help those that can't do what you need them to do.
AKA. Put an excise tax on new gasoline cars. Because someone that can afford a new car can certainly pay the tax. Do the same with business leasing cars. Use the money to fund programs to get poor people out of their gasoline cars and into electric ones.
A gas tax on the other hand will be perceived correctly by poor people as a rubber hose that hurts them a lot. And wealthy not at all.
The idea here is to allow the cost of decisions to be felt in the wallet, but not hurt the spending power of those who are making climate-conscious purchasing choices.