Polluter Pays. The Case for Taxing the Rich.

 

The now standard narrative is that the developed countries are to blame for the climate catastrophe. Some think that's an unduly broad brush.  The case for taxing the rich wherever they're located.

10% of the world’s population are responsible for about half of all greenhouse gas emissions, while the bottom half of the world contributes just 12% of all emissions. This is not simply a rich versus poor countries divide: there are huge emitters in poor countries, and low emitters in rich countries.

Consider the US, for instance. Every year, the poorest 50% of the US population emit about 10 tonnes of CO2 per person, while the richest 10% emit 75 tonnes per person. That is a gap of more than seven to one. Similarly, in Europe, the poorest half emits about five tonnes per person, while the richest 10% emit about 30 tonnes – a gap of six to one. (You can now view this data on the World Inequality Database.)

Why do these inequalities matter? After all, shouldn’t we all reduce our emissions? Yes, we should, but obviously some groups will have to make a greater effort than others. Intuitively, we might think here of the big emitters, the rich, right? True, and also poorer people have less capacity to decarbonize their consumption. It follows that the rich should contribute the most to curbing emissions, and the poor be given the capacity to cope with the transition to 1.5C or 2C. Unfortunately, this is not what is happening – if anything, what is happening is closer to the opposite.

...Countries have announced plans to cut their emissions significantly by 2030 and most have established plans to reach net-zero somewhere around 2050. Let’s focus on the first milestone, the 2030 emission reduction target: according to my recent study, as expressed in per capita terms, the poorest half of the population in the US and most European countries have already reached or almost reached the target. This is not the case at all for the middle classes and the wealthy, who are well above – that is to say, behind – the target.

There are many ways to reduce the overall emissions of a country, but the bottom line is that anything but a strictly egalitarian strategy inevitably means demanding greater climate mitigation effort from those who are already at the target level, and less from those who are well above it; this is basic arithmetic.

Arguably, any deviation from an egalitarian strategy would justify serious redistribution from the wealthy to the worse off to compensate the latter. Many countries will continue to impose carbon and energy taxes on consumption in the years to come.

To accelerate the energy transition, we must also think outside the box. Consider, for example, a progressive tax on wealth, with a pollution top-up. This would accelerate the shift out of fossil fuels by making access to capital more expensive for the fossil fuel industries. It would also generate potentially large revenues for governments that they could invest in green industries and innovation. Such taxes would be politically easier to pass than a standard carbon tax, since they target a fraction of the population, not the majority.

Whatever the path chosen by societies to accelerate the transition – and there are many potential paths – it’s time for us to acknowledge there can be no deep decarbonization without profound redistribution of income and wealth.

Can you imagine the Tories or the governing Liberals jumping on this? I can't.