On 25 November 2020 at 15:00 CET, the Centro Euro-Mediterraneo sui Cambiamenti Climatici (CMCC) is hosting a webinar on 'Progressive Revenue Recycling of Carbon Taxes Can Alleviate Poverty While Avoiding Dangerous Climate Change'.
Existing estimates of optimal climate policy ignore the possibility that the revenues from a carbon tax could be used in a progressive way; as a result, these models imply that near-term climate action must come at some cost to the poor. This storyline reverses when progressive revenue recycling is taken into account. An equal per capita refund of carbon tax revenues implies that a 2°C target can pay large and immediate dividends for improving wellbeing, reducing inequality, and alleviating poverty. In an optimal policy calculation (without a pre-specified temperature constraint) that weighs the benefits against the costs of mitigation, the recommended policy is characterised by aggressive near-term climate action followed by a slower climb towards full decarbonisation; this pattern prevents runaway warming while also preserving tax revenues for redistribution. This approach corrects a long-standing bias against strong immediate climate action.