Greening the Basic Income

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The following article is authored by Mark Paul.

 


  • One policy could finance UBI and curtail carbon emissions. It is the carbon price-anddividend or, in essence, a green basic income.

  • The policy could reduce the Gini coefficients by 3-6 percent and slash poverty.

  • Carbon price-and-dividend schemes are in place in Canada and Switzerland, with dozens of other jurisdictions implementing forms of carbon pricing.
     


 

The world is in the midst of multiple ongoing crises: the global pandemic, the climate crisis, and a persistent economic inequality crisis that condemns far, far, too many to poverty. As the vaccines begin to roll off the production line, an end to the pandemic is in sight. But the other issues, including continued scarcity amidst abundance, abundance that is helping to fuel the climate crisis, are going to take much longer to address.

 

In these times of runaway inequality and an ever-warming planet, policy makers are increasingly looking for ideas to mitigate emissions and redistribute resources at the same time. One of the biggest ideas gaining traction is a global green new deal.[1] As countries seek to rebuild after this devastating crisis, green investments should unquestionably be front and centre. But complementary bold ideas, including a universal basic income, are catching on too.

 

The hiccup, per usual, is the pesky, and often misguided question of “how do you pay for it?” But what if I told you there was a straightforward policy that could finance a universal basic income and substantially curtail carbon emissions? It is called a carbon price-and-dividend.

 

The policy is simple really: set an economy-wide price on carbon across the globe and rebate the revenue back to the people on an equal per-capita basis. It is true, a carbon price, in the form of a tax or cap, means higher prices, at least in the near future as the transition away from fossil fuels takes hold. But these higher prices will be more than offset for the vast majority of the world's population through the carbon dividend. The math here is rather straightforward: the rich and those living in high-income countries are responsible for the vast majority of greenhouse gas emissions, and thus will pay the bulk of the tax (Gore, 2020). But the money is redistributed to everyone, equally. Thus, low-income people will end up with far more money in their pockets at the end of the day.

 

Such a policy could reduce the Gini coefficient by 3-6% and drastically slash the number of people living in poverty (Davies et al., 2011). This green basic income would be highly progressive while providing people not only with the benefits of cash but cleaner air too. All the while the pricing would curtail emissions as the global community runs out of time to meet the goal established under the Paris Agreement to “limit global warming to well below 2, and preferably 1.5ºC, compared to pre-industrial levels” (UNFCCC, 2015).

 

To account for historic emissions, rich countries could agree to simply forgo their carbon dividends, leaving more money to be redistributed amongst low- and middle-income countries. Either way, the money from a carbon price will not be substantial enough to provide a true basic income for people in middle- and high-income countries, though it would be a substantial basic income for others. Additionally, the income flow will not last forever. One of the major goals of the policy is to facilitate a transition away from fossil fuels, thus the revenue will eventually run out.

 

A carbon price-and-dividend is already in place in Canada and Switzerland, while dozens of other national and sub-national governments have implemented some form of carbon pricing to date. Similar policies, such as the Alaska Permanent Fund have also recognized that common environmental assets—in this case oil—can be leveraged to benefit the people through a form of basic income support. The fund has for decades paid out upwards of $2,000 per resident per year (Boyce, 2019).

 

Carbon pricing is no panacea. Other complementary policies, including large-scale green investments and smart regulations are essential. But a green basic income is a straightforward way to deal with two of our most pressing issues at the same time.

 

References:

 

Boyce, J., 2019. Let’s pay every American to reduce emissions: a 'carbon dividend' could be politically popular – and save the atmosphere. Politico: The Agenda.

 

Gore, T., 2020. Confronting carbon inequality: putting climate justice at the heart of the COVID-19 recovery. Oxfam International Policy Papers.

 

UNFCCC, 2015. The Paris Agreement. COP Report No. 21.

 

Notes:


[1] Three sources that discuss a global green new deal is the Climate Social Science Network, the Roosevelt Institute’s paper on pathways to implement, and the United Nations Conference on Trade and Development’s statement.  

 

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Mark Paul is an assistant professor of economics and environmental studies at New College of Florida. His book, “Freedom is Not Enough: Economic Rights in an Unequal World,” is due out with University of Chicago Press in 2022.

 

The author is responsible for the facts contained in the article and the opinions expressed therein, which are not necessarily those of UNESCO and do not commit the Organization.

 

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