Editor's Note: A carbon tax or some other adequate carbon pricing system is urgently needed in order to deal with global warming and climate change. However, the idea of a “tax” isn’t particularly popular with some segments of society (particularly, those who don’t understand that pollution is an externality that must be internalized in some way in order to achieve a “perfect” free market). But a little bit of attention to how such a tax can be revenue neutral and help the economy should (theoretically) help to break down those barriers. Thanks to the folks at Skeptical Science for this piece:
The main source of opposition to carbon pricing is the perception that it will 'kill jobs' or otherwise hurt the economy. However, economic forecasts have rarely been done for a carbon fee in which 100% the revenue is returned to the taxpayers. Under proposed revenue-neutral carbon tax legislation, about two-thirds of taxpayers are projected to receive more in refunds than they pay in higher energy prices. It's a net financial gain for most people. This is a key factor that differentiates a revenue-neutral carbon tax system and its economic impacts from other carbon pricing systems.
“Personal income per capita goes up because households receive the total benefit of the dividend as well as improved job opportunities and wages in the general economy, which more than counteracts any negative effects from higher energy and commodity prices.”