Carbon tax on luxuries is fairer way to cut emissions, finds analysis

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Such taxes are in operation around the world, but usually carbon is taxed at a uniform rate no matter what product it is associated with.Some economists argue this is an unfair and largely ineffective system for tackling household emissions, particularly in higher-income countries. This is because some high-carbon spending, such as heat and fuel, is essential for many households and therefore carbon taxes will do little to change spending habits.

Meanwhile, across the board – and particularly in higher-income countries – inequalities were reduced under the system of luxury taxes. A higher proportion of emissions reductions came from curtailed discretionary spending on transportation and holidays, rather than cutbacks to essentials, such as heat and electricity use. “It does have fairer distributional effects and better results in the short term,” says Oswald.

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