Protecting the poor with a carbon tax and equal per capita dividend

We find that if all countries adopt the necessary uniform global carbon tax and then return the revenues to their citizens on an equal per capita basis, it will be possible to meet a 2 °C target while also increasing wellbeing, reducing inequality and alleviating poverty. These results indicate that it is possible for a society to implement strong climate action without compromising goals for equity and development.

Messages for policy

• The revenues from a carbon tax capable of achieving a 2 °C target will be large enough to fund substantial policies that can promote equity and protect vulnerable populations.

• An equal per capita redistribution of carbon tax revenues within countries — a relatively straightforward policy to implement — can increase wellbeing, reduce inequality and alleviate poverty.

• These benefits occur in countries at all levels of development, primarily accrue to individuals at the bottom of the income distribution, and are even greater with global equal per capita redistribution.

• Large benefits will occur even if some revenues are lost to administrative costs or are saved to fund other programs, and they can make the poorest citizens net beneficiaries this decade.

• Given an equal per capita refund, the optimal timing of global greenhouse gas mitigation is characterized by rapid initial reductions, followed by a slower climb towards net zero emissions.