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

Jim Y. Jin*, Shinji Kobayashi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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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.
Original languageEnglish
Article number100965
Number of pages8
JournalResearch in Economics
Volume78
Issue number3
Early online date29 May 2024
DOIs
Publication statusE-pub ahead of print - 29 May 2024

Keywords

  • Climate change
  • Fairness
  • Efficiency
  • Pareto improvement

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