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Globally, we find that support for populism has collapsed during the 2020-21 coronavirus pandemic. This includes support for populist parties, agreement with populist attitudes, and the approval ratings of individual populist leaders.

On average, populist leaders saw a 10 percentage point drop in their approval ratings from the second quarter of 2020 to the final quarter of this year. Meanwhile, support for key populist attitudes – such as belief in the “will of the people” or that society is divided between ordinary people and a “corrupt elite” – has declined in almost every country.

Are we on our way to universal basic income? A pilot scheme has been announced in two English locations, in which 30 people will be paid a lump sum of £1600 a month without conditions for two years, and observed for the effect this has on their lives. This follows a slow but steady groundswell of calls for such a measure — calls that have accelerated since “furlough” effectively trialled something similar during lockdown.

But while UBI may serve as a pragmatic response to increasing inequality, we should be alert to what such a measure implies: that the majority of citizens are now passive, consumption-only participants in the economic order. And once this is acknowledged openly, expect it to have knock-on effects in the political sphere as well.

The idea of a Universal Basic Income (UBI), an amount paid by the government to its citizens with few restrictions, has been around for a long time. Yet in recent years, the movement towards a UBI has gained momentum, with supporters on the right and the left advocating for a UBI, particularly with leaders in the tech industry.

However, a UBI is a deeply flawed idea, with theoretical arguments not standing up under scrutiny and practical issues that have not been accounted for.

In a sense, using carbon tax revenue to replace other tax revenue pits the goal of reducing environmental emissions against the goal of preserving revenue for government programs, because efforts to reduce carbon emissions will starve the government of funds. Of course, taxes could always be raised in the future if and when this problem arises, and Gillis [35] suggests tax cuts are often reversed or undone in subtle ways. However, in the American context, cutting taxes has become an important electoral tool, and politicians therefore have an incentive to spotlight and campaign against tax increases, making maintenance of tax revenue more difficult than in other countries [36]. Carbon taxes could thus become a new means of reducing the size of government by changing the default situation to one of declining tax revenues.

The causal role of perceptions is particularly pertinent in the domain of climate policy. In democracies where a broad segment of the population perceives institutional corruption, a politics of resignation may set in, whereby mass-based interest groups that might otherwise become organized and campaign for greater action on environmental issues are rendered impotent by diminished expectations. At the same time, among citizens who are not particularly concerned about climate change, perceived corruption may reinforce their insouciance. The perception may have this effect by breeding distrust of politicians and cynicism about their motives, inflaming preexisting antipathies to taxes and ‘big government’, and reinforcing beliefs in the logic of laissez-faire (Persily and Lammie 2004). Under such regimes, democratic politicians may neglect to pass stringent, cost-imposing climate policies, insofar as doing so may elicit electoral backlash from both a distrustful public and native carbon-intensive industries (Jenkins 2014). Numerous case studies corroborate these hypotheses. In Australia, the former Prime Minister, Kevin Rudd, has blamed his failed reelection partly on the passage of an unpopular carbon tax (Rootes 2014). A crisis of confidence in the Australian government was a major culprit; a media campaign, promoted by the native mining industry, was waged to cast aspersions on the government’s alleged incompetence in raising energy prices and benefiting certain native (clean energy) companies at the expense of others crucial to national income (energy-intensive mining and manufacturing) (Eckersley 2013). Perceived corruption also bolstered distrust in Spanish and Portuguese political institutions in 2011-12, with subsequent setbacks to climate policy; panel survey evidence suggests that rising distrust had little to do with the financial crisis, but rather with the widespread perception among citizens “that representative institutions are not responsive to their demands and concerns, exacerbated in Portugal by “elite misbehavior” (Torcal 2014, 19). To the contrary, in Scandinavian countries, sustained public trust in non-corrupt political institutions has been a primary enabler of early and sustained support for CO2 taxation (Andersen 2004; Hammar and Jagers 2006). By focusing on the effect of perceived corruption on the climate policies of industrialized democracies, this paper contributes to previous scholarship that has mostly conceived of corruption in its ostensibly more extreme forms (i.e. illicit, quid pro quo, “black” corruption) and has tended to conflate the impacts in democracies and autocracies. The theory herein contains four related assumptions: (1) Institutional corruption, where it is manifest, yields a significant negative effect on the strength of climate policies across industrialized democracies, when 6 Electronic copy available at: https://ssrn.com/abstract=3175064 controlling for relevant political and economic factors. (2) Perceptions of corruption may be taken as a reliable proxy for institutional corruption. Such perceptions are not exclusively or even primarily an outcome of fleeting individual corruption scandals, but are commonly a symptom of an underlying institutional corruption to which all democracies are potentially vulnerable; however the instantiations and causal mechanisms of undue legislative influence may differ cross-nationally, public perceptions serve as an adequate proxy for these gray areas of corruption. (3) The perception of corruption may itself be an independent cause of weak climate policy, by contributing to a politics of resignation among groups of environmentally motivated citizens, and a politics of distrust among environmentally indifferent citizens. Such perceptions are likely to bolster the strategic influence and laissez-faire demands of native energy-intensive industries opposed to climate regulations. (4) Institutional corruption is likely to negatively impact policy areas other than climate change, particularly areas that also involve vested business interests and require long-term foresight, planning, and coordination (e.g. regulating systemic risk to the banking sector). Perceptions of institutional corruption may be most pernicious in legislative domains where there is a significant time lag between the policies enacted and their intended outcomes. While the evidence in this study cannot confirm this cross-policy effect, social scientists ought to test this hypothesis elsewhere and identify the distinctive properties of perceived corruption in other relevant policy domains

A carbon dividend seemed like a great way to solve climate politics. But it might not work. Once more unto the breach, my friends—once more to talk about carbon pricing. For 40 years, economists and environmentalists have proposed a simple solution to climate change: Put a price on it. If the government levies a fee on every ton of heat-trapping pollution that goes into the air, then the economy will move to cleaner, cheaper energy sources, and carbon pollution will fall over time. In practice, this means raising the cost of fossil fuels—and doing that is easier said than done. Despite support from , carbon-price schemes  in the United States, and they cover only about  overall. Researchers have come to understand that carbon pricing presents an unusually difficult political challenge, because it marries very salient costs (all fossil-fuel costs go up, for everyone) to somewhat opaque benefits. Worse, some economists argue that carbon prices fall hardest on the poor, because lower-income households spend more of their income on energy. So in the past few years, advocates have proposed a twist meant to bypass those obstacles and make an uncomfortable idea more acceptable, even popular. Under this new scheme, known as a revenue-neutral carbon price, the government taxes every ton of carbon pollution but, instead of using that money, simply returns it to taxpayers as a payment. In theory, this helps voters see not only the costs (higher prices) but also the benefits (a big juicy check). In America, this “tax and dividend” idea has become fashionable as a nonideological, theoretically bipartisan salve to climate change, a way to tax carbon without growing the size of the government. It is championed by the , the , and …  (alas). But abroad, some countries have actually gone and implemented the policy. And “there are a good number of hypothetical scenarios that show the idea has some promise,” , a political-science professor at UC Santa Barbara, told me. This week, a team of researchers, including Mildenberger,  of whether a revenue-neutral carbon price actually increases support for climate policy. The results weren’t as good as the theory. “We don’t find strong evidence that rebates are increasing people’s comfort with carbon pricing,” Mildenberger said. Even when people receive more in dividends than they pay out in the tax, they resent higher energy prices and tend to view the policy in light of their broader politics. “My basic view is that we’re not seeing evidence that dividends are a transformative way to overcome the politics of climate change.” Mildenberger and his colleagues surveyed citizens of Canada and Switzerland, the two countries that have implemented something close to a revenue-neutral carbon price. In Canada, residents of some provinces receive a lump-sum carbon rebate as part of their annual tax return; all Swiss residents see the rebate as a discount on their health-insurance premiums. Neither of these policies is the “ideal” tax-and-dividend scheme that some economists endorse, in which everyone receives a monthly or quarterly check. But they’re close, and they’re admirably progressive: In Canada, for instance, 80 percent of residents receive more in the rebate than they pay out in the tax. Yet “in practice, [people] in Switzerland and Canada don’t know much about the rebates they’re receiving,“ Mildenberger told me. “They underestimated the benefit of the policy, and they overestimated the cost.” In Ontario, for instance, nearly half of respondents didn’t know they had received a rebate. In Saskatchewan, most respondents did know but thought their rebate was, on average, $268 per year, when it was really $444. Support for the carbon tax was informed by party ID: Members of Prime Minister Justin Trudeau’s Liberal Party, which implemented the tax, supported it; members of the Conservative Party opposed it. When the researchers showed respondents their true rebate, nobody’s views changed, but right-wing respondents disliked the policy more. “They became more likely to believe they were getting ripped off by the policy,” he said. In Switzerland, most respondents just didn’t know about the rebate. When told how much they had made from the policy, approval of the policy went up, but by a very small amount, the survey found. “There was nothing to support the more ambitious carbon taxes in the future that scientists say are necessary,” Mildenberger said. Last summer, Swiss voters  a larger tax-and-dividend scheme in a national referendum. These tepid reactions to the policy are strictly irrational for most taxpayers, who are receiving what is, in effect, free money. Yet it makes a certain amount of sense: If you don’t support transforming society (and paying more at the pump) to address one of the major challenges of our time, why should $444 a year change that? “There’s a certain … weirdness to using dividends to solve the political challenges of carbon pricing,” Mildenberger said. “Because the actual benefit of carbon pricing is having a stable climate in 10 years. The payment is, like, a side benefit.” For Mildenberger, the results suggested that subjective costs and benefits will always trump real economic facts. Because carbon prices affect every facet of the economy, and provoke lots of controversy, “there’s a fundamental asymmetry to the potential benefit you’re getting and the intense messaging you’re getting about costs,” he noted. In Ontario, for instance, the provincial Conservative government put stickers on every gas pump warning about the effect of the carbon price. A onetime yearly payment can’t beat such omnipresent messaging, he said. (Canada is planning , to raise the payments’ mind share.) Gernot Wagner, an economist at NYU, was more sanguine about the results. “There are people out there who are convinced their policy design is the answer, and, look, it never is,” he told me. “At the end of the day, it’s all politics. And it’s all identity politics, which is not what we’d like to be the case, but it is.” In his native Austria, he said, the government just implemented a carbon-tax-and-dividend scheme, along with a slew of business-friendly tax cuts and a national public-transit subsidy. “The whole package is what’s going to make the difference,” he said. More than 20 years passed between the first carbon-tax proposal in Austria, he noted, and the specific combination of policies and coalitions that made it possible. For Mildenberger, though, the results show that it’s very hard to make policy create political feedback loops. In American history, only a few programs—such as Social Security, the GI Bill, and Medicare—have created political conditions that sustain and broaden them going forward. In general, “people are not mobilizing to defend their material interests,” he said. In a political environment where election results themselves are contested, it’s folly to expect people to gravitate toward a reality-based understanding of costs and benefits, he said. “There’s much crazier things that people now believe than that the benefits or costs [of a policy] are $500 as opposed to $5,000. There may be real limits to how much we can expect the objective structure of policies to reshape politics in this moment.” It’s a discouraging finding—and one that may point to a more hardball politics of climate change going forward. At least corporations can be counted on to mind their cash flow.

Over time, political experience with carbon taxes has highlighted a truth that should have been obvious long ago: Carbon taxes are taxes, and people don’t like taxes. People don’t like paying more money for stuff. More broadly, carbon taxes are an almost perfectly terrible policy from the perspective of political economy. They make costs visible to everyone, while the benefits are diffuse and indirect. They create many enemies but have almost no support outside the climate movement itself. All of the political intensity is with opponents. (More on that here.) One response to this critique that has grown increasingly popular in recent years is the notion of refunding the tax revenue — giving the money back to voters. Various ways to do this have been proposed, the simplest being an equal dividend to each taxpayer. Some proposals have all the tax revenue refunded; some have a limited portion refunded. The idea is that the tax would discourage carbon-intensive activities, while the dividend would mute political opposition. In most of the proposed schemes, the lower half of the income scale comes out ahead — dividends are larger than tax burdens — and in some cases, up to 80 percent of taxpayers come out ahead. A refunded carbon tax is basically large-scale wealth redistribution from the biggest fossil fuel users to middle- and working-class citizens. This kind of ​“fee-and-dividend” framework is endorsed by the Climate Leadership Council (centrist/​bipartisan elites), the Citizens’ Climate Lobby (left-leaning grassroots campaigners), and one-time presidential candidate Andrew Yang, though they differ on important details. The logic of the policy is compelling to proponents — and to many people when they first hear about it — and they feel deeply confident that it will compel the public too. The evidence on that, however, is mixed. Do refunds increase the popularity of carbon taxes? At last, some field research. There are numerous studies showing that, in a polling or focus-group setting, the inclusion of refunds increases public support for a hypothetical carbon tax — see here and here, among others. But that kind of polling has not translated into victories in, for example, Washington state, where a fee-and-dividend policy lost badly in a public referendum in 2016. More to the point, because there have been so few fee-and-dividend policies implemented in the real world, there’s been very little field-testing of the public’s actual response to it. That brings us to a new paper in the journal Nature Climate Change by political scientists Matto Mildenberger (UC Santa Barbara), Erick Lachapelle (University of Montreal), Kathryn Harrison (University of British Columbia) and Isabelle Stadelmann-Steffen (University of Bern). They do something novel: look at public opinion in places where carbon fee-and-dividend policies have been implemented. It turns out there are only two. Switzerland established a rebate program in 2008. The carbon tax reached 96 Swiss francs (about $105) per metric ton in 2018; about two-thirds of the revenue is rebated on a per capita basis, with everyone (including children) receiving an equal share. Canada established a rebate program in 2019 as part of its national carbon-pricing strategy. So far, the scheme covers four of 10 provinces, with more than half of the national population. The price was initially set at 20 Canadian dollars (about $16 in U.S. dollars) a metric ton, rising to CA$50 by 2022; recently the government released a new schedule that would target CA$170 by 2030. The refund (technically, the ​“Climate Action Incentive Payment”) is based on the number of adults and children in the household, with a 10 percent boost for rural households. It is highly progressive; 80 percent of households get more back than they pay. The Nature Climate Change paper looks at public opinion in both countries. In Canada, it draws on a longitudinal study, which surveyed the same residents — ​“from five provinces, two subject to the federal carbon tax (Saskatchewan and Ontario), one with provincial emissions trading (Quebec), and two with provincial carbon taxes (British Columbia and Alberta)” — five times from February 2019 through May 2020, during which time the scheme was proposed, debated, passed and implemented. In Switzerland, the paper draws on a survey of 1,050 Swiss residents in December 2019. So what do these surveys tell us? It’s not great. Refunds don’t change opinions much; many recipients don’t even know they exist In Canada, throughout the period in which the refund was hotly debated, passed and implemented, public approval…didn’t change much. What’s more, opinions on the policy were divided primarily not by who got a refund and who didn’t, or who got a bigger refund. They were divided by (say it with me) partisanship: By wave 5 [of the survey], 75% and 81% of Liberal supporters in Ontario and Saskatchewan respectively supported carbon pricing, compared to 32% and 13% of Conservatives in these same provinces. Perhaps more importantly, Canadians remain confused and in many cases totally unaware of carbon refunds. When asked whether they got one at all, ​“many Canadians did not know, including 17% in rebate provinces and between 33% and 36% in non-rebate provinces.” When asked how big their carbon refund was, many in non-rebate provinces reported positive amounts, while those who did receive one underestimated it by as much as 40 percent on average. ​“Only 24% of Ontario respondents and 19% of Saskatchewan respondents estimated a rebate amount falling within the correct $100 dollar range of their true rebate.” (Perhaps unsurprisingly, Conservatives underestimated their rebate more than Liberals did.) You might think, well, Canada’s program is new. What about Switzerland, where they’ve been receiving rebates for over a decade? It’s…even worse. Only 12 percent of Swiss respondents know that part of the carbon revenue is refunded; 85 percent did not know they’d gotten a refund at all. D’oh! Additional information about refunds often doesn’t help You might think, well, the problem is how these countries administer their refunds. In Canada, it’s a line on your tax return. In Switzerland, it’s a discount on your health insurance premiums. Both are clearly marked, but lots of people don’t exactly scrutinize those documents and keep track of every line item. Surely support would rise if people are made aware of the refund they are receiving, yes? Er, no. In both countries, some survey respondents were given individualized rebate information — that is to say, they were shown, on the documents in question, exactly how much they had received in annual carbon refunds. In Canada, this treatment did not raise support for carbon pricing at all. In fact, respondents who were shown what they received were less likely to believe that they had been made whole (this trend was also more pronounced among Conservatives). “Canadians who learned the true value of their rebates,” the paper reports, ​“were significantly more likely to perceive themselves as net losers, even though most Canadians are net beneficiaries.” D’oh! Maybe Switzerland? There, information about respondents’ own past rebates mildly increased support for the current policy (by ​“around one-fifth of a standard deviation”), but it did not increase support for an increase in the tax at all. And in fact, in a June 2021 referendum, the Swiss voted against an increase in the tax and the rebates. In short, the available evidence suggests that carbon refunds don’t do much to reshape public opinion on carbon taxes, even among voters with accurate information about the refund they receive.

In his new book, Bill McGuire argues it's too late to avoid catastrophic climate change.

The Earth science professor says lethal heatwaves and extreme weather events are just the beginning. Many climate scientists, he said, are more scared about the future than they are willing to admit in public. , lethal , and  are just the beginning of the climate crisis, according to a leading UK climate scientist. In his new book published Thursday, "," Bill McGuire argues that, after years of ignoring warnings from scientists, it is too late to avoid the catastrophic impacts of climate change.The University College London Earth sciences professor pointed to a  this month and  that destroyed 16 homes in East London as evidence of the rapidly changing climate. McGuire says weather will begin to regularly surpass current extremes, despite government goals to lower carbon emissions. "And as we head further into 2022, it is already a different world out there," McGuire told . "Soon it will be unrecognizable to every one of us."His perspective — that severe climate change is now inevitable and irreversible — is more extreme than many scientists who believe that, with lowered emissions, the most severe potential impacts can still be avoided. McGuire did not immediately respond to Insider's request for comment.Many climate scientists, McGuire said, are much more scared about the future than they are willing to admit in public. He calls their reluctance to acknowledge the futility of current climate action "climate appeasement" and says it only makes things worse. Instead of focusing on net-zero emission goals, which McGuire says won't reverse the current course of climate change, he argues we need to adapt to the "hothouse world" that lies ahead and start taking action to try to stop material conditions from deteriorating further. "This is a call to arms," McGuire told : "So if you feel the need to glue yourself to a motorway or blockade an oil refinery, do it." This week, Senate Democrats agreed to a  that would be the . The bill includes cutting carbon emissions 40% by 2030, with $369 billion to go toward energy and climate programs.

The world is perilously close to breaching the 1.5 degrees Celsius warming threshold enshrined in the 2015 U.N. Paris Climate Agreement. The World Meteorological Organization (WMO) said there is a 66% chance Earth's temperature will rise by more than 1.5 degrees by 2027. The odds of exceeding threshold have "risen steadily since 2015," when they were near zero, the WMO report said. Just last year the group put the chances of doing so within the next five years at 50-50, Reuters reported.

The temperature is unlikely to stay above the 1.5 degrees threshold for very long, at least at first. The temporary jump is partially linked to the upcoming El Niño Southern Oscillation. But fossil fuels are the underlying driver of long-term global warming, and they're still heavily in use. A 2022 assessment from the Global Carbon Budget warned that the world had less than a decade to significantly reduce its level of greenhouse gas emissions, or it will blow through the "carbon budget" allotted to keep global warming below 1.5 degrees Celsius in the long run. Meeting that goal is becoming less and less likely, forcing global leaders to grapple with some hard truths.

In practice, however, there's a problem with the idea of slashing carbon emissions by putting a price on them: it isn't doing much about climate change. More governments than ever are imposing prices on carbon, even as U.S. President Donald Trump backpedals on efforts to combat global warming, yet more carbon than ever is wafting up into the air. Last year, the world's energy-related greenhouse gas output, which had been flat for three years, rose to an all-time high. Absent effective new policies, the International Energy Agency has projected, energy-related greenhouse gas emissions will continue rising through at least 2040.

If governments proved willing to impose carbon prices that were sufficiently high and affected a broad enough swath of the economy, those prices could make a real environmental difference. But political concerns have kept governments from doing so, resulting in carbon prices that are too low and too narrowly applied to meaningfully curb emissions. The existing carbon-pricing schemes tend to squeeze only certain sectors of the economy, leaving others essentially free to pollute. And even in those sectors in which carbon pricing might have a significant effect, policymakers have lacked the spine to impose a high enough price. The result is that a policy prescription widely billed as a panacea is acting as a narcotic. It's giving politicians and the public the warm feeling that they're fighting climate change even as the problem continues to grow.

In a sense, using carbon tax revenue to replace other tax revenue pits the goal of reducing environmental emissions against the goal of preserving revenue for government programs, because efforts to reduce carbon emissions will starve the government of funds. Of course, taxes could always be raised in the future if and when this problem arises, and Gillis [35] suggests tax cuts are often reversed or undone in subtle ways. However, in the American context, cutting taxes has become an important electoral tool, and politicians therefore have an incentive to spotlight and campaign against tax increases, making maintenance of tax revenue more difficult than in other countries [36]. Carbon taxes could thus become a new means of reducing the size of government by changing the default situation to one of declining tax revenues.

It’s true that a carbon tax can be well-designed. For economists, that means using the revenue to reduce distortionary taxes. For clean-energy hawks, it means using the revenue to spark cleantech growth. For both, it means provisions that automatically boost the tax if emission reductions are not on track. (And there are other considerations too: how far upstream to levy the tax, how to deal with cross-border “leakage,” etc. This post could have been even longer, trust me.) The worst possible thing to do from both perspectives would be to set the tax at a static, low level and use a bunch of the revenue to carve out special deals for various industries. Then you’d get the economic hit from the tax and malign distributional issues. And yet … that is exactly where all the incentives point. There are many financial interests involved. Every one of them will be leaning on legislators to a) keep the tax as low as possible and b) secure them favorable treatment. This same rent-seeking spectacle took place around the climate bill. But another benefit of a cap-and-trade system is that no matter how distributional issues are settled (i.e., no matter how the permits are allocated), the cap remains the same and the environmental benefits are guaranteed. When it comes to a tax, however, loopholes and kickbacks reduce environmental benefits. Securing those benefits will be a constant, running battle. Environmentalists will be “those people who are constantly fighting to raise taxes.” That is unlikely to endear them to the public or generate support for other green initiatives.

By increasing the relative price of carbon-intensive goods and services, carbon pricing is understood to incentivize the adoption of existing low-carbon technologies and (indirectly) stimulate the development of low-carbon innovations (). Investments in low-carbon alternatives are not only encouraged through present carbon prices but also through expectations about future carbon price increases. It is, however, unclear how strong such innovation effects actually are and whether carbon pricing can generate more than incremental changes. Tvinnereim and Mehling (), for instance, review the record of several prominent carbon pricing strategies and find that they have, to date, helped realize limited opportunities for innovation and system-wide transformation. Rather, current trajectories and emission reductions deviate little from business-as-usual scenarios, even in the case of Sweden’s $140 (USD) carbon price for the transport and building sectors. Others have observed similar patterns (–). This suggests that, in practice, carbon pricing strategies tend to promote the optimization of established business models and technologies but neglect more fundamental system change necessary for deep decarbonization. While optimization remains important, it does little to confront carbon lock-in, encourage radical innovation, or avoid dead-end paths (). Indeed, research indicates that investments in long-lived, carbon-intensive infrastructures, such as natural gas, are still ongoing, even in jurisdictions with prominent carbon pricing regimes (, ). Retiring these investments prematurely in order to align with deep decarbonization pathways will be politically difficult and costly (i.e., due to compensation for affected firms and communities). In contrast, we argue that incremental change alone is insufficient to pursue low-carbon pathways at the required pace. Established systems are characterized by deep lock-ins (e.g., large sunk costs in infrastructure and cultural conventions underpinning user practices) that encourage movement along established development trajectories (, ). Deliberately accelerating transitions, therefore, involves weakening lock-ins (e.g., removing fossil fuel subsidies and banning carbon-intensive technologies) and supporting system building for low-carbon alternatives (e.g., stimulating new innovations, business models, and markets).

The underlying rationale for carbon pricing is appealing in its simplicity: GHG emissions are viewed as a negative externality because the social costs flowing from climate change impacts are not reflected in the market price of carbon-intensive goods and services (). Climate change is framed as the consequence of a market failure that can be corrected by placing a price on carbon so that actors also pay for the social cost of their carbon-intensive activities and reduce their demand for such goods and services. Framing the climate challenge as a market failure, however, fails to seriously appreciate its scope and depth. Indeed, the climate challenge has been referred to as a “grand challenge” () or “super wicked problem” () that has thus far resisted traditional policy approaches. We argue that climate change can be more appropriately understood as a system problem. Core societal functions, such as heating or mobility, are met through large and deeply entrenched sociotechnical systems made up of interconnected technologies, infrastructures, regulations, business models, and lifestyles (). Over many decades, these systems have become increasingly locked into the combustion of fossil fuels and the associated release of GHG emissions. Consider, for instance, how the design of cities has developed alongside the diffusion of the gasoline-powered personal automobile; how norms about comfort and attire have become entwined with energy-intensive indoor temperature regulation; and how important political and economic interests have become entrenched with fossil fuel-based resource development or electricity provision. Addressing the climate challenge, therefore, involves fundamental changes to existing systems, referred to as “sustainability transitions” (). These transitions entail profound and interdependent adjustments in sociotechnical systems that cannot be reduced to a single driver, such as shifts in relative market prices. In mobility, for example, a low-carbon transition might encompass interacting developments around new vehicle technologies (e.g., autonomous electric cars), infrastructures (e.g., vehicle charging stations and high-speed rail), business models (e.g., mobility as a service and intermodal transport), and regulation (e.g., emission performance standards) but also changes in city planning (e.g., reduced urban sprawl) and lifestyles (e.g., telework and local vacations). The market failure framing fails to appreciate the broad scope of the climate challenge and the sweep of system elements that must undergo change. And so, the resulting solution orientation is far from sufficient.

Letting market prices of fossil fuels rise immediately to reflect social costs may not be desirable for other reasons too. The carbon tax on fuel aims to restructure economies by raising the cost of a critical resource- the juice that makes them run. But restructuring takes time as people, capital and other resources do not flow seamlessly into new sectors. During the transition, resources can be unemployed for long periods, and the larger the immediate price increase, the larger the potential disruption in the short term.

Some of the resources used in other sectors will flow into the renewable energy and supporting sectors where both investment and jobs will increase. Yet, this too, will not automatically and immediately make up for disinvestment in fossil fuels, as is already evident. Supply- demand mismatches will happen in the short run. Add to this substantial uncertainty regarding several economic variables, such as the size of fuel reserves, the size of stranded assets, the harshness of winter, the future direction of climate policy, the pace of innovation in the renewables sector, or demand risk, and it is clear how economic disruption may be magnified.

But political feasibility in the US is not even the main problem with the carbon tax. The bigger issue: Greenhouse gas emissions are a global problem that cannot be solved by curbing polluting activities only in the United States. In 2019, the latest pre-pandemic year, the US  accounted for only about 11 percent of global greenhouse gas emissions, far below China’s  27 percent. Even if the US cut its emissions in half, world emissions would only fall by about 5 percent – a decline that would be more than offset by continued growth in emerging economies.

Carbon taxes also are porous. Producers and consumers can avoid the tax by importing foreign goods with a high carbon content. And lower prices from reduced US carbon consumption could encourage more carbon consumption in other countries.

Even a CO2 tax set at the politically-infeasible levels of $300 and $450 per ton would avert only about 0.1°C of global warming and one centimeter of sea-level rise by 2100, according to standard U.S. Environmental Protection Agency (EPA) climate modeling.[7] All the economic pain would produce no detectable effects on weather patterns, crop yields, polar bear populations or any other environmental condition people care about. The climate benefits from now to 2035 would be even more miniscule.

The net transfers among households are quite large when a sufficiently high tax is put on carbon. The net benefits and costs in Figure 4 are calculated in per capita terms. The average person in the poorest decile would receive a net transfer of about $1,371 and lives in a household of 3.7 people, so their household’s net beefit would be over $5,000 annually. A carbon dividend of this magnitude would enable the poorest households to increase expenditures by 13% and force the richest households’ to cut expenditures by 3%. It is important to recognize that these effects are temporary. Over time, the carbon tax will rise and emissions will fall, which will eventually reduce the size of the carbon dividend. While a carbon dividend mitigates the short-run regressivity of a carbon tax, a carbon tax cannot provide a longrun funding source for a Universal Basic Income.

If the literature on carbon tax misses hidden benefits of carbon tax, it also misses a hidden danger: the carbon tax generates revenue only if individuals or firms are paying the tax, that is, if they are emitting carbon. To the extent that they are able to bypass the tax by substituting to lower-carbon substitutes—or to the extent that lower-carbon emitting firms drive out higher carbon-emitting firms—revenues from the tax fall. If those revenues have been used to substitute for other taxes, when revenues fall the programs funded with those revenues come under threat.

One study, for example, in analyzing the effect of carbon taxes in Canadian provinces, assumes fixed elasticities of response of fuel use to carbon taxes [33]. But given the immense research and development infrastructure that has been generated around environmental technologies, this assumption of fixed elasticities is questionable, and it may be necessary to model also the elasticity of the elasticity—that is, it may become much easier to improve energy efficiency or substitute renewable fuels than it is now. For example, the price per watt of solar photovoltaic cells has dropped from over $70 in 1977, to under 70 cents today. That kind of non-linear development in technology is common in the rapidly developing green technology sector, but it is not incorporated in the current models. Indeed, the most ambitious countries have aimed to become 100% free of fossil fuel, and in the Nordic countries 63% of electricity already comes from renewable energy [34; see also 30].

There are two concerns about carbon fees and dividends that are specific to the question of whether they constitute a step toward a basic income. First, a carbon dividend by design will fade away. As the price of carbon rises, demand will fall. Eventually, the declining demand effect will surpass the rising price effect, and the dividend will begin to decline. The policy is driven primarily by the environmental problem, and the dividend is one use of the revenue, motivated by considerations of justice and political feasibility. (In fact, it is conceivable that if the dividend were to become more important than the environmental tax that funds it, it could lead to perverse efforts to reduce the environmental impact in order to prolong and maximise the dividend. It would be useful to see some modelling of this possibility.) Once the environmental problem is solved, there is no longer a compelling reason to provide a dividend. Thus, viewed as a basic income, a carbon dividend is only a temporary fix.