The right way to do a carbon tax is to refund 100% of the money to the population. Everyone gets a check every month for the entire amount collected, divided by the number of citizens. This way it costs you nothing unless you emit more carbon than the average person, and you can even come out ahead if you emit less. On top of that, it ends up being a net transfer from corporations to individuals, because corporations still pay the tax but only individuals get the checks.
It would also be a very informative trial run for a UBI (though in this case the amount would be smaller).
The "problem" with this is strictly politics: a) It would actually work, so the fossil fuel energy companies hate it; b) There is no opportunity for graft because the money is distributed to everyone and not just the politically connected, so there is no special interest lobby trying to make it happen.
This is essentially the Canadian model. The federal government mandates that every province must put a minimum price on carbon. If they don't the federal program puts a direct price on carbon and rebates the residents of the province directly. About 90% of the money goes directly to residents and the other 10% is directed by the federal government to programs within the affected province, for example in Ontario they used the money for energy retrofits of public schools.
All the money goes to the refund or every part that doesn't is a regressive tax and an opportunity for corruption.
It's also not clear what local deference is buying you here, because this is one of the very few cases of a national issue where the right solution is clear and simple and makes sense to implement uniformly at the national level.
The only sense of doing it at a local level is if the national government fails to act.
The deference to local levels here is simply pragmatic. Constitutionally the environment is a provincial government responsibility. The Federal backstop is only legal because of the "peace, order, and good government" clause of our constitution.
That actually makes sense in a way. If the local government is addressing an issue the national government shouldn't need to touch it. In the US it's basically the opposite (once the federal government gets involved with something the states can't override it), and it's basically terrible because there were originally meant to be limits on what the federal government can get involved in but they've been expanded beyond all reason.
And local control can still "work" even when the same solution should apply everywhere because they can each individually adopt the same solution, the same as different countries can. In theory a province could even counteract the effect of the federal government trying to get them to spend 10% of the money by just distributing it to the population as it should have been, though of course politicians rarely have that much willpower.
Why wouldn't people just use their UBI on buying more things, which, as rudimentary understanding of physics goes, yields more demand for production, which increases C02 output?
Perhaps I'm missing something, but I don't understand how taxing and redistributing the money does anything besides shifts the consumer power a bit???
I mean, wouldn't a better solution just be to have a carbox tax and then destroy the taxed money?
You're neither creating nor destroying any new money.
Bob is average. Bob pays $100 in carbon tax and then gets a check for $100. He doesn't have any more or less money to spend than he did before. He is able to continue his existing behavior and make no change whatsoever, if he wants.
But now he has the incentive to make a change. Because if he installs electric heat pumps instead of heating his house with oil, now he is only paying $50 in carbon tax but still gets a check for $100. If he can get the heat pumps installed for a monthly payment of less than $50, that's what he's going to do. And that's the goal.
Ok, I follow now. I do remain skeptical it would work in practice though in any meaningul way to get people to reduce their carbon footprint. For that to work, the numbers would have to be truly significant. I'm not sure what those numbers would look like, but I imagine if people cant forsee the immediate economic benefit to them in the very near future, it wouldn't work.
They would foresee an immediate economic benefit to them. Many of these technologies are already close to breakeven. The numbers above are a simplified arbitrary example. Try this one.
Bob needs a new furnace. Heat pumps are more efficient and save on energy costs, but also cost more up front than a new furnace. That basically evens out, so maybe right now the heat pumps still cost $5/month more than the furnace, at least in the short term. Until the cost of operating the furnace goes up $50/month because of the carbon tax, in which case he wants to immediately save $45/month.
And Bob is average. Alice is a heavy user. She has a big old house that she likes to keep at 90 degrees all winter, so the carbon tax would increase her heating bill by $500/month, which she can save by switching to heat pumps and installing solar panels on her roof. So she's going to do that right away.
We already collect federal excise tax on fuel. Changing the amount has a trivial cost. We already collect withholding tax from individuals. Changing the amount has a trivial cost (your boss adds money to your paycheck every week instead of removing it if your tax rate is now negative, retirees and people on disability/unemployment have the amount added to their existing social security/benefits check).
There would be a minor one-time cost for the small minority people none of that applies to, to fill out a form specifying where you want the money to be deposited or the check mailed. But the fundamental process of distributing the money would be a transfer of a fixed amount to each citizen with a social security number, which is easily computerized.
This misses embodied carbon in imports and much of the emissions from domestic agricultural and industrial processes, which are surely large enough to not be ignorable.
Obviously the administrative cost of taxing some other emissions source is going to depend on the nature of that emissions source, but if hypothetically evaluating emissions from certain sources turned out to be prohibitively burdensome, that would not be any excuse to avoid doing it for fuels at a minimum, which constitute the majority of emissions anyway.
And a more efficient way to handle imports would be to impose general tariffs on imports from countries that don't themselves impose a carbon tax, rather than trying to calculate the effects of something happening in a foreign country. Which would have a more significant effect anyway, because causing the entire country to reduce its own emissions would be a much bigger win than causing only their exports to do so.
The cost would probably be similar to the COVID stimulus. Maybe they can require the dividend to be distributed using FedNow to drive down the cost somewhat.
This is a very interesting idea. Actually, it's also the only solution I can think of that would incentivise people to emit less carbon, using selfishness as a lever to achieve cooperation - similar to capitalism itself.
You really believe that a within a complex restructuring like this, there would not be any opportunity for graft? Would love to step into whatever fairy tale you're in.
If 100% of the money is evenly distributed to every citizen, there is not a cent left to fund any corruption. Ideally the minimal administrative costs should not even come out of the carbon tax, of which fully one hundred percent should be evenly distributed to every citizen.
Presumably there would be some wrangling about how to measure CO2 emissions in certain harder to objectively measure contexts, but they're still not getting any of the money, they might just sneak in a way to not pay their full share. And we know with low variance how much CO2 is emitted by a unit of motor fuel or natural gas or coal, which represent the bulk of emissions.
It would also be a very informative trial run for a UBI (though in this case the amount would be smaller).
The "problem" with this is strictly politics: a) It would actually work, so the fossil fuel energy companies hate it; b) There is no opportunity for graft because the money is distributed to everyone and not just the politically connected, so there is no special interest lobby trying to make it happen.