> Despite the many limitations, the estimates here, especially in light of corroborating survey evidence, offer insights into reducing opposition to carbon taxation. We highlight three takeaways:
> 1. The sizable welfare losses suggest that public resistance may stem from genuine economic concerns, not simply distrust of taxes or an ideological divide. On average, an increase in carbon taxes that raises energy prices 1% causes a ≈ 0.5% decrease in money-metric welfare as a fraction of three-year consumption.
> 2. Because the main driver is indirect macroeconomic feedback through the labor income channel, measures beyond conventional public finance approaches—such as compensation schemes that focus solely on prices—may be beneficial. For example, the results suggest that expansionary (green) monetary policy could help ease the income burden, though perhaps at some inflationary cost.
> 3. The disproportionate burden on working-age households relative to retirees highlights the right direction of targeted redistribution: from the old to the young.
3 Comments
> Despite the many limitations, the estimates here, especially in light of corroborating survey evidence, offer insights into reducing opposition to carbon taxation. We highlight three takeaways:
> 1. The sizable welfare losses suggest that public resistance may stem from genuine economic concerns, not simply distrust of taxes or an ideological divide. On average, an increase in carbon taxes that raises energy prices 1% causes a ≈ 0.5% decrease in money-metric welfare as a fraction of three-year consumption.
> 2. Because the main driver is indirect macroeconomic feedback through the labor income channel, measures beyond conventional public finance approaches—such as compensation schemes that focus solely on prices—may be beneficial. For example, the results suggest that expansionary (green) monetary policy could help ease the income burden, though perhaps at some inflationary cost.
> 3. The disproportionate burden on working-age households relative to retirees highlights the right direction of targeted redistribution: from the old to the young.
JUST TAX CARBON
REDISTRIBUTE THE CARBON TAX