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Equal tax and equal compensation: A fair and efficient way to save climate

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  • Jin, Jim Y.
  • Kobayashi, Shinji

Abstract

We show that “equal tax and equal compensation” (T&C) is fair as justified by the two fairness principles. It differs from any Pigouvian tax with fixed lump-sum payments and can motivate every country to maximize world welfare. It benefits countries with current per capita emissions lower than the world average and would benefit every country when compared with a fair benchmark where emissions are duly penalized and compensated. Subsidizing emission reduction by poll tax is Pareto efficient and Pareto improving over status quo, but unfair. An imperfect T&C with a sub-optimal tax or pyramid taxes can still benefit the world.

Suggested Citation

  • Jin, Jim Y. & Kobayashi, Shinji, 2024. "Equal tax and equal compensation: A fair and efficient way to save climate," Research in Economics, Elsevier, vol. 78(3).
    • Handle: RePEc:eee:reecon:v:78:y:2024:i:3:s1090944324000292
    DOI: 10.1016/j.rie.2024.100965
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    More about this item

    Keywords

    Climate change; Fairness; Efficiency; Pareto improvement;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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