Question

What does “double dividend” mean when it is associated with emissions taxes? In the class, we discussed the Washington carbon tax initiative. What does this initiative do? (You do not need to write down the exact numbers associated with the initiative.) Who are the big winners and big losers of the initiative?

Answer 1

Double dividend in emission taxes refers to the idea that these taxes can both reduce pollution (first dividend) and also reduce the economic costs associated with the tax system by using the revenue generated to displace other more distortionary taxes that slow economic growth at the same time (second dividend).

According to the Secretary of State of Washington,the carbon tax initiative would impose a carbon emission tax on the sale or use of certain fossil fuels and fossil-fuel-generated electricity, at $15 per metric ton of carbon dioxide in 2017, and increasing gradually to $100 per metric ton, with more gradual phase-in for some users. It would reduce the sales tax rate by one percentage point over two years, increase a low-income sales tax exemption, and reduce certain manufacturing taxes.

Environmental groups, labor unions, racial and economic justice advocates,green tech industries health workers and nearly two dozen tribal nations would have been the primary beneficiaries of this measure being passed as well as society in general,the State of Washington and the earth.

The losers would have been major polluters,oil and gas companies and vested interest groups who care more about profit than the environment.