Revenues from Carbon Pricing: Why Their Use is, in Essence, Funded by a Capitation Tax

Abstract

Cap-and-trade and carbon-tax policies generate streams of tax revenue or of valuable allowances, which represent the value of using the atmosphere for storing carbon emissions. The common ownership of the atmospheric commons suggests equal ownership of the value stream it provides. If equal ownership is granted, governmental appropriation of carbon revenues becomes an equal-dollar-per-person (capitation) tax. The social norm against capitation taxes allows comparison of carbon-tax and cap-and-trade policies with their counterparts that mimic equal ownership. Both the green employment tax swap proposed by Gilbert E. Metcalf and the U.S. cap-and-trade system proposed by Robert N. Stavins are found to compare unfavorably with equitable policies.