Protect the poor from being penalised by carbon taxes | Torsten Bell

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In those glorious pre-pandemic days we only had climate change to worry about. Post-pandemic, we’ll need to get right back to worrying about it – and actually doing something about it.

On the “doing” front, economists like the idea of carbon taxes to help reduce our emissions. And recent research shows that such taxes can work. Sweden was one of the first countries in the world to implement a carbon tax in 1991, having extended VAT to petrol the previous year. The result was 11% lower transport fuel emissions compared with similar OECD countries.

So good news on the economics of carbon taxes but there is just one, rather big, problem: the politics. The public really doesn’t like them. It was French attempts to raise a tax on fuel on environmental grounds that triggered months of gilets jaunes protests that left Paris in flames.

Rather than give up, the key is to learn the lessons of these defeats. New analysis of the comprehensive Swiss rejection (92% voted against) of an energy tax in 2015 holds some clues. The public was sceptical that green taxes would be effective and worried they would hurt the poor. So the to-do list for eco-warrior economists is to design policies that protect lower-income families and to do a better job of setting out the evidence from the likes of Sweden. After all, it’s fair enough for the public to want some reassurance that there will be some environmental gain for all this tax pain.

o Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org

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