Not Even Free Money Can Fix a Carbon Tax

Robinson Meyer, The Atlantic
2022.01.26

The idea: A revenue neutral carbon price.

“The government taxes every ton of carbon pollution but, instead of using that money, simply returns it to taxpayers as a payment. In theory, this helps voters see not only the costs (higher prices) but also the benefits (a big juicy check).”

The experiment: Canada and Switzerland [are] the two countries that have implemented something close to a revenue-neutral carbon price. In Canada, residents of some provinces receive a lump-sum carbon rebate as part of their annual tax return; all Swiss residents see the rebate as a discount on their health-insurance premiums.

The result: The dividend is too small to matter, and approval of it generally falls along party lines.

“Support for the carbon tax was informed by party ID: Members of Prime Minister Justin Trudeau’s Liberal Party, which implemented the tax, supported it; members of the Conservative Party opposed it. When the researchers showed respondents their true rebate, nobody’s views changed, but right-wing respondents disliked the policy more.” 

The takeaway: Policy interests rarely outweigh idenity politics, and enacted policies rarely consilidate its own coalition of interests

In American history, only a few programs—such as Social Security, the GI Bill, and Medicare—have created political conditions that sustain and broaden them going forward. In general, “people are not mobilizing to defend their material interests.”