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A carbon tax on investment income could be more fair and make it less profitable to pollute – a new analysis shows why

By illuminem briefings 🌎

Aug 21 2023 · 1 min read

Illuminem Voices
Carbon · Carbon Market · Carbon Regulations

illuminem summarizes for you the essential news of the day. Read the full piece on The Conversation or enjoy below

🗞️ Driving the news: A new study by U.S. researchers has delved into the personal responsibility of households for greenhouse gas emissions, focusing on the emissions used to generate income, including wages, investments, and retirement income
• The findings expose the stark disparity between high- and low-income households in carbon emissions, shedding light on the current inefficiencies in climate policy

🔭 The context: Using a global data set of financial transactions and emissions, the researchers linked emissions to incomes and wages, considering the emission intensity of the industries that employ individuals and the investment portfolios that mirror the economy
• The study expands on earlier work that examined emissions related to consumption, by now including all sources of income
This approach has never been analyzed before on a country-wide level

🌎 Why does it matter for the planet: The findings can revolutionize climate policies, making them more effective and fair, as well as reimagining the carbon tax to focus on profit generation.

⏭️ What's next: The study's findings may prompt governments to consider a profit-focused carbon tax
• By taxing income related to emissions rather than consumption, it could motivate corporations, shareholders, and fund managers to cut emissions and invest in cleaner options

💬 One quote: " Based on our analysis... I believe a shareholder-based carbon tax is worth exploring" (Jared Starr, Sustainability Scientist at UMass Amherst)

📈 One stat: In the income-based approach to carbon emissions, the share of emissions from the top 1% of U.S. households is about 2.5 times higher than their consumer-related emissions (15% to 17% vs. 6%). Meanwhile, the bottom 50% of households are responsible for 31% of consumption-based national emissions but only 14% of income-based emissions

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