How Green Credits might ease the way for Green Taxes

My video contribution to the Royal Society’s #2050challenge for #NetZero argues the case for green credits to ease the way for progressive consumer taxes on resource-intensive goods.

We need to do more than decarbonise: we are over-exploiting the earth’s resources in general. We need to give up on the idea that we can tackle this without tackling the world’s growing demand for ‘stuff’. The good news is that curbing resource use would also accelerate progress towards Net Zero, by reducing embedded energy usage and the scale of capital investment needed to decarbonise the world economy.

Like any tax, progressive consumption taxes would also face resistance. But since many governments are not in immediate need of more tax revenue, and can borrow cheaply, the prospect of higher green taxes could be made more palatable by giving everyone equal ‘green credits’ upfront. And since these equal payments would disproportionately help the poor, the package would be seen as fair.  

Only later would the green taxes be phased in, and green credits could be used to pay them. The taxes would also be designed to fall more heavily on the rich, meaning that after allowing for the credits, poorer households would be both absolutely and relatively better off.

The rich account for a disproportionate share of consumption of energy and resource intensive goods, and green consumption taxes could be made even more progressive by relating them to the size and weight of goods and homes. So for example, by taxing big cars at a much higher rate, say by an extra 10% on purchase and with premium fees for usage, the rich would be hit a lot harder. This would encourage people to buy smaller, less resource intensive items, or share them, or generally switch their spending towards services.

About markcliffe

Board Advisor and Thought Leader on the impact of disruptive change. Former Chief Economist of ING Group
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