Luxury items should face a higher climate penalty – study
Electricity is a necessity, while jetting on holiday isnt but they are still charged the same rate for each tonne of climate pollution. That is unfair and less likely to change peoples polluting behaviour, according to new research. University of Leeds environmental economist Yannick Oswald wants people buying luxury items, including flights and new cars, to pay a higher carbon tax per tonne of emissions. That would be balanced out by lower climate penalties on foods and electricity. Oswalds analysis found a system like that would cut pollution more effectively likely because its easier to forego an exotic vacation than it is to stop heating your home, when the price rises. Globally, the very richest people have an oversized carbon footprint: the richest 1% produce 10% of all greenhouse pollution, while the top 10% are responsible for nearly half. But carbon taxes encouraging people to avoid planet-heating goods and services by making them more expensive typically dont distinguish between essentials and luxury items. Thats also true for New Zealands Emissions Trading Scheme (or ETS). Polluters such as an airline buying jet fuel for a domestic flight or an energy company burning gas to generate electricity must surrender one carbon credit for every tonne of emissions they produce. Energy providers, including Genesis Energy, have some of the largest carbon bills under the ETS. Thats unfair, Oswald concludes in a scientific paper published Wednesday in the journal One Earth. Low-income families spend a higher share of their income on heating their homes and fuelling their cars than richer households. So when these are subject to a standard carbon penalty, vulnerable families feel more of the economic pain. And often, the carbon tax is set too low to have a proper effect on emissions, Oswald said. That could be fixed, he concluded, by charging a higher carbon penalty on luxury goods and a lower amount on essentials. The paper modelled the effect this concept would have in 88 countries though New Zealand was not part of the analysis. The definitions for luxuries and essentials differed by country. For example, in the US petrol was considered a necessity, while it was categorised as a luxury in Germany since demand dampens in the European nation when the price of oil rises. US residents buying new cars, new appliances, package holidays and transport would be charged higher carbon taxes, while paying less on housing, heating, electricity and food. Compared to a uniform carbon levy, the targeted system saw the rich contribute more and lower-income families less, Oswalds modelling found. In addition, the luxury taxes could boost average carbon reductions by nearly 10% while consumers paid less in penalties overall. The idea could be popular, he said, because the majority of the population would not experience an overall more expensive lifestyle. But Oswald noted the rich, who are being targeted, have the resources to lobby against the proposal. Policy researcher Jess Berentson-Shaw said targeted taxes appear a more just way of charging for pollution. Policies like this account for peoples context say, a single parent working three jobs in a place where theres no other transport options available so theyre having to drive. The cash raised would need to be put into greener alternatives, Berentson-Shaw said. (Oswalds paper suggests all revenue raised could help people retrofit their homes for low-carbon energy.) But Berentson-Shaw was wary of any idea conveying that better-off people, even though the demographic emits more greenhouse gas, were responsible for the environmental crisis. Few people consciously make climate change worse, she added. But those that do the people extracting and selling fossil fuels and goods reliant on fossil fuel should be the focus. The idea, Oswald said, would also be more complex to implement in an emissions trading system. Economist Eric Crampton, with the think-tank NZ Initiative, agreed it would be complex. He said the concept might work more effectively on paper but would be a terrible idea in practice. If a system was introduced, different bodies would argue that their goods and services were essentials, not luxuries, Crampton said. Everyone would be commissioning experts to produce reports great for economists with flexible morals, not so hot for the country. Our weekly email newsletter, by the Forever Project's Olivia Wannan, rounds up the latest climate events. Sign up here .