Carbon tax should fund free public transport, say researchers

Using carbon tax revenue to fund free green electricity and public transport could significantly reduce household emissions, according to researchers at the University of Leeds. 

The research team examined household expenditure data on home energy and motor fuel from 275,614 households across 27 European countries.

They then examined the impact of introducing two different compensation strategies to mitigate the impact of new carbon taxes on low-income households.  

Carbon taxes on home energy and motor fuel often place a greater burden on low-income households because the same tax rate is applied to every taxpayer, regardless of income. 

The researchers found that giving cashback through tax rebates, without bringing in additional low carbon investments such as renewable electricity or public transport, would result in only small reductions in home energy and motor fuel emissions.

In contrast, introducing universal green vouchers with expanded renewable electricity generation and public transport would reduce home energy emissions by 13.4%, and motor fuel emissions by 23.8%.

Dr Milena Buchs, Associate Professor in Sustainability, Economics and Low Carbon Transitions in Leeds’ Sustainability Research Institute said: ‘Stringent climate policies, including carbon taxes on home energy and motor fuels, are likely to be part of government strategies to achieve climate targets, but they put higher burdens on low-income households than on rich households. Governments urgently need to make climate policies fairer by finding ways that can compensate disadvantaged people.

‘Providing people with green living options, like free green electricity and free public transport, is promising because it’s re-distributive, saves emissions and reduces fuel and transport poverty.’

‘These findings demonstrate that policies that aim to compensate for unfair distributional impacts of carbon taxes need to be combined with additional environmental interventions.

‘The provision of green goods and services needs to be expanded, and fuel and transport poverty minimised, so that social and environmental objectives can both be met.’