Not all carbon emissions come from the same cause: they can come from basic needs like heating a house, but also from non-essential luxury activities like leisure travel. And yet when proposing the implementation carbon taxthey tend to apply equally to all emissions, regardless of whether they fit the inevitable needs.. This can produce and exacerbate inequalities among the population.
A study recently published in the journal one world recommends higher taxation of carbon emissions from the luxury sector, so that if the 88 countries analyzed in the study will apply With this tax, which focuses only on the sector in question, emissions will be reduced by 75%. It is necessary to meet the Paris Agreement’s goal of keeping climate change well below 2°C by 2050.
“There is an injustice about who uses energy or carbon for basic needs or for luxuries, but it’s an issue that hasn’t been translated into concrete policy yet,” says Yannick Oswald, an economist at the University of Leeds.
Many countries, such as Canada and Mexico, have activated carbon pricing policies. These policies price all emissions at the same rate or focus on one type of emission, such as heat or fuel. However, previous research has shown that In high-income countries, these policies tend to hit low-income households the hardest and, moreover, do not have a large impact on reducing emissions.. This may be because resources such as heating or fuel make up a larger share of low-income people’s spending and are difficult to dispense with.
Tourism should pay more than heating
To see how a tax that separates carbon emissions from essential and luxury activities would work, the researchers built a model based on the carbon footprints of households from 88 different countries. For each country, they designed a tax rate for different types of purchases and ensured that activities that accounted for a larger portion of low-income spending were taxed less than activities specific to high-income spending. For example, vacation travel will be taxed at a higher rate than home heating.
With a flat tax rate applied, only 37% of the revenue from this global carbon tax will come from luxury purchases. However If the tax in question had focused on the luxury sector, this rate would have risen to 52%.
The luxury tax proposed by this economist was not only “fairer” in terms of household income, hitting low-income families less and high-income families more, but was also slightly better at reducing annual household emissions in the very short run. Researchers state that this may be the reason If the price goes up, luxury purchases are more likely to be abandoned than a basic purchase.
While the luxury tax turned out to be fairer in all countries studied, the researchers found that a flat tax might also be fair in some low-income countries. In South Africa, for example, low-income households already spend much less on fuel or heating than high-income families. In contrast, a carbon tax focused on the luxury sector is more beneficial for equity when applied to high-income countries.
While this type of policy can make significant progress towards reducing global emissions, the researchers also note: can be a difficult goal to achieve in practice. Few countries have taxes on carbon emissions and, moreover, if they focus on the luxury sector, this group is capable of avoiding such obligations, according to the study’s authors.
“Public support for fair climate policies is high and luxury carbon taxes are likely to be just as popular,” Oswald says. “Despite the limitations of the model, the big takeaway is this: when designing climate policies, consideration should be given to the diverse nature of consumption, and this will increase the equity of climate policy.”
Reference work: DOI: 10.1016/j.oneear.2023.05.027
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