carbon emissions

Poor families hardest hit by carbon tax

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Policymakers in the U.K. have proposed an individual climate change tax to help hit a target of emission reduction by 2050. “Taxing people just on the size of their carbon footprint might seem like an obvious solution to climate change, but the economics show it’s not that simple,” says Klaus Hubacek. “In real terms, a carbon-only tax would cost more for poor families, who already struggle to meet the cost of utility bills.” (Credit: iStockphoto)

U. LEEDS (UK)—Taxing individuals for the amount of carbon they use would hit the poor and those living in the north of the U.K. hardest, forcing them to pay four times more as a proportion of their income than higher earners.

An individual climate change tax is one of the instruments proposed by policymakers in the U.K to ensure the country hits its target of an 80 percent reduction in emissions by 2050.

An international team of researchers says a fairer way to tackle climate change would be to tax households on a range of greenhouse gases such as CO2, methane, and nitrous oxide. Findings are published in the journal Environmental Science and Technology.

The team, co-led by Klaus Hubacek from the University of Leeds, show that a CO2-only tax scheme, would cost the poorest households 6 percent  of their annual income while high earners would only pay around 2 percent.

This would mean a family with an income of £9,582 a year would pay £573 for a CO2 tax. Under a greenhouse gas tax (GHG tax), they would pay just £412—a reduction of £161.

“Taxing people just on the size of their carbon footprint might seem like an obvious solution to climate change, but the economics show it’s not that simple,” Hubacek says.

“In real terms, a carbon-only tax would cost more for poor families, who already struggle to meet the cost of utility bills.

Despite leaving low income households better off, a GHG tax would still be regressive, meaning that it imposes a greater burden on poor households than richer ones.

“Under a GHG tax, poorer people would pay a smaller proportion of their income towards the tax without compromising a reduction in emissions, which would be fairer. Nevertheless, this isn’t a perfect solution.”

This disparity is partly caused by the different lifestyles of low and high income individuals. Poor households spend around 40 percent of their income on household costs such as heating and electricity compared to just 8 percent for high earners.

A GHG tax would shift the balance from carbon emissions to other gases, which would give relief to the poorest members of society.

“Food production alone generates a huge amount of methane, which is 20-times more potent than CO2 as a greenhouse gas,” says co-lead author Kuishuang Feng from the University of Leeds.

“Including methane in a broader GHG tax would shift the balance from household utilities to food, reducing the strain on poorer families. However, because a GHG tax it sill regressive, poor households may need to be compensated to make sure they are not unfairly penalized.

“One way the government could do this would be to reduce the rate of other taxes for these households, or to allow these families to use more carbon.”

The team, which includes members from the Universities of York, Maryland, Cambridge, and Berlin, and the Stockholm Environment Institute, will now extend their model to investigate how the impact of the two taxes are determined by where people live and their surrounding infrastructure.

More University of Leeds news: www.leeds.ac.uk/news

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