Study Calls for a Carbon Tax on the 1% to Tackle the Climate Crisis

Studies have quantitatively shown that the wealthy emit way more carbon. Now, a new report from British research organization Autonomy has an interesting idea: Make the rich pay.

“The enormous release of carbon emissions by the very richest in society over the past few decades is astonishing," said Will Stronge, a co-author of the report. "Our analysis suggests that the most effective way for the government to tackle climate change would be to properly tax the rich, through a well-targeted carbon tax scheme."

The report—titled "A Climate Fund for Climate Action"—is British, hence the talk of pounds instead of dollars. But the principle is the same for any wealthy nation—the rich have big carbon footprints and don't pay for the negative externalities like carbon emissions. The report finds the top 1% of earners in the United Kingdom generate as much carbon in a year as a low earner does in 26 years. They look at the longer term and find that "across 20 years, the cumulative emissions of an individual in the top 1% reaches 2,015 tons whilst someone in the bottom 10% will have emitted only 88 tons."

The reason they look at the long term is to calculate how much money might have been raised had there been a tax on the excess carbon emitted by the rich. They say this is a Pigouvian tax, which is "focused on the excessive consumption of the wealthiest." Interestingly, Investopedia has a different definition:

"A Pigovian (also spelled Pigouvian) tax is a tax assessed against private individuals or businesses for engaging in activities that create adverse side effects for society. Adverse side effects are those costs that are not included as a part of the product's market price. These include environmental pollution, strains on public healthcare from the sale of tobacco products, and any other side effects that have an external, negative impact.... A popular example of a Pigovian-style tax is a tax on pollution. Pollution from a factory creates a negative externality because impacted third parties bear part of the cost of pollution."

Autonomy proposes taxing only the carbon emissions above the U.K. individual average, which they say "stands in the canon of tax fairness," looking not to tax the entire amount emitted/consumed by the top 1% but simply the "excess." This seemed at first to be a silly distinction, given how much bigger the footprint of the one-percenter is, but digging into the data:

The U.K. average is 10 metric tons per individual, and the top 1% averages 80 metric tons, so the difference is 70. The rate of tax proposed for this study is 115 pounds sterling per metric ton, the price proposed by the Swedish Ministry of Finance, which comes out to 8,050 pounds per year. According to Fiona Harvey of The Guardian, the top 1% are earning more than 170,000 pounds, so it will be noticed.

But what a difference it would make! It would have raised 126 billion pounds over a 20-year period, which could have paid for tripling solar capacity, created five times the current offshore wind, or retrofitted 8 million homes. The report noted: "With no U.K. carbon tax in place, the richest 1% have been free to ‘dump’ disproportionately large amounts of carbon into the atmosphere for little to no cost, creating a burden now shouldered by the rest of the population. To green the U.K. economy, and bring about the change current and future generations desperately need, this must change."

It is a great idea, as is creating a climate fund. But why just the 1%? The other nine of the top 10% are pumping out 23 tons, why not tax them too? Why not tax everyone over the average? According to Investopedia, Pigovian taxes are designed to discourage negative externalities, "a byproduct produced by some individual, business, or industry that has a negative impact on society, but where the entity that created this byproduct does not pay for it. Instead, society pays the price."

Everyone should be discouraged from burning fossil fuels, emitting carbon, and creating negative externalities. We have noted previously that the top 10% emit up to 43% of the carbon and that the top 10% consumes 20 times more energy than the bottom 10%. Just taxing the top 1% doesn't make sense when we all need a little discouragement.