ESRI study shows that government could collect more than enough from carbon taxes to compensate low income households

22/07/2004

ESRI study shows that government could collect more than enough from carbon taxes to compensate low income households

A recent study for the Environmental Protection Agency (EPA) showed:

• Carbon taxes need not hurt the poor because the revenues could be more than enough to compensate them
• A strategy can be devised that leaves the poor on average better off than before the carbon tax
• Over 90 % of households on low incomes can be targeted to receive compensation set at €246, the national average household carbon tax paid on fuel
• Losers among them would be those that use above average amounts of carbon-emitting energy for reasons of wastefulness or need
• Schemes to help the fuel poor could be afforded
• Applying carbon taxes across the board but compensating low income households will maximise the incentive to become more energy efficient.
• The net result is not more tax but a switch, which involves awarding compensation and reducing other taxes.