How a Carbon Tax Could Help Fund a Universal Basic Income

08.12.2024

A new study finds that governments could raise trillions of dollars per year and help pay for a universal basic income by taxing the world’s biggest polluters.

When a heat wave or hurricane hits, there’s one group of especially vulnerable people: those who are experiencing homelessness. Not every unhoused person has the option to seek shelter during a disaster, and not all will hunker down in a cooling center or evacuation shelter. Ultimately, what they need is a steady income to find permanent housing. They need safety. As the number of people experiencing homelessness soars to record highs, the call to protect them mounts every year.

One proposed solution to the homelessness crisis is universal basic income, where the government (i.e., taxpayers) provides a regular cash payment to everyone—a policy perhaps most famously championed by 2020 presidential hopeful Andrew Yang. Now, a new idea suggests that the funds for universal basic income could be raised by taxing carbon polluters. That would redistribute wealth in a way that both deters further emissions of heat-trapping greenhouse gases and mitigates the harm already being done by climate change to some of society’s most vulnerable people; it would bring about climate change mitigation and adaptation.

“People with homelessness are the most vulnerable in any society,” said Jiaying Zhao, a professor of psychology and sustainability at the University of British Columbia. “They cannot escape extreme heat or cold. They are among the first to suffer from the consequences of climate change. What this means is that we need to see cash transfers as a climate adaptation solution.”

Zhao helped pioneer one of the world’s most robust tests of basic income so far. In Vancouver, she and her colleagues distributed a single payment of 7,500 Canadian dollars to 50 individuals experiencing homelessness in 2018. Participants had to meet stringent criteria; they couldn’t have mental health issues and couldn’t have been homeless for more than two years. The money came with no strings attached—participants could do as they pleased.

“The first thing we found was that the cash transfers reduced homelessness by 99 days per person per year,” said Zhao. “That’s removing somebody off the street for more than three months over one year.”

Participants also didn’t spend more on drugs or alcohol the way some might assume. Cash went toward necessities. In a video the project developers shared online in 2020, Ray, who received one of these payments, said the income served as a stepping stone to get him off the streets. Now, he has dreams of helping other people who are unhoused, especially those struggling with addiction and abuse.

“I kind of want to give back where I came from,” he said in the video. “Right now, I’m a seed that can grow into an oak tree.”

Footing a Trillion Dollar Bill

Implementing basic income in the U.S. could cost up to $3 trillion, and critics often decry that it would come with unpopular tax hikes. But what if instead of raising those funds from middle-class paychecks, governments raised them from carbon polluters? What if the government provided no-strings-attached dollars to everyone who needed it and footed the bill with a carbon tax? A new study published in Cell Reports Sustainability this June suggests that this could be economically feasible.

“If the world had the ability and the political will to give everyone a basic income, then we would be free from this idea that if we do any good policy that will help someone, some people will be left behind.”

Rashid Sumaila
professor of ocean economics at the University of British Columbia

The researchers analyzed 186 countries to model how a basic income would function if it targeted households below the poverty level and was funded by programs like a carbon tax, a plastic pollution tax, tax penalties for overfishing, and taxes on fishing. If polluters had to pay $70 per every ton of carbon dioxide or other equivalent greenhouse gases they emit, governments could accumulate some $2.3 trillion a year globally, per the study. Adding that to household incomes could boost the economy as families increase their spending power. Study coauthor Rashid Sumaila, a professor of ocean economics at the University of British Columbia, even speculates that the money could also lower migration patterns as people would have more financial support to stay home as they’d like. Overall, the economic benefits outweigh the cost, he said.

A universal basic income funded by a carbon tax would accomplish two things at once: reduce greenhouse gas emissions heating up the planet and reduce the poverty making some people more vulnerable to the impacts of a hotter planet. Critics often cry that giving out money will make people lazy or unproductive, but that’s not what the research suggests. Across the globe, governments gave fossil fuel companies a whopping $7 trillion in subsidies last year. Why don’t leaders invest in their people instead?

“There’s so much [a universal basic income] can do to the world in a good way, but how do we get it done?” Sumaila said.

A Global Rise of Cash Transfers

Basic income programs don’t yet exist at a global scale the way Sumaila’s study outlines. At an international level, these programs would look vastly different from country to country, so Sumaila hopes to assemble a team of people for each continent to begin building plans for how this work could happen.

Other projects are already doling out cash around the globe. In Denver, a program led by the University of Denver’s Center for Housing and Homelessness Research worked to distribute various sums of money ranging from $500 to $6,500 among 807 people experiencing homelessness for 12 months. Ten months after enrolling in the program, participants saw their housing outcomes improve and spent less time in shelters.

“It’s helped so much in my life,” said participant Moriah Rodriguez, per the program’s website. “This pilot program could be a transformational thing for people throughout the city.”

This type of housing security is especially urgent during the summer. Every year, the season arrives with a deadlier punch than the year past. Last year, over 2,300 people in the U.S. died due to extreme heat. That’s nearly 34% more than in 2022 and almost 44% more than in 2021. In Arizona’s Maricopa County, of the 339 deaths from heat in 2021, at least 130 of the deceased were unhoused. This summer, people have already begun to die as temperatures reach dangerous highs.

A universal basic income funded by a carbon tax would accomplish two things at once: reduce greenhouse gas emissions heating up the planet and reduce the poverty making some people more vulnerable to the impacts of a hotter planet.

The U.S., of course, is not alone. In British Columbia where Zhao’s research took place, more than 600 people died in 2021 from a record-breaking heat dome that overtook the Pacific Northwest—three were experiencing homelessness. Elsewhere, that population often makes up a third of extreme heat deaths.

These impacts are happening across the globe, and communities in the Global South need urgent relief from the extreme poverty they face. The world’s most extensive universal basic income study is underway in Kenya, where the nonprofit GiveDirectly is handing out money to some 23,000 people. Some households received $22.50 per month for two years while another group will keep receiving that amount for 10 more years. Others got a $500 single lump sum. So far, families have been able to save more money and launch businesses. It has helped alleviate mental health stresses.

“Giving cash helps people in poverty survive the climate crisis they did not create. For families who just survived a climate disaster, cash reaches them quickly and allows them the dignity to choose what they need most,” said Tyler Hall, GiveDirectly’s communications director, in an email. Those families have used that funding to buy better seeds, disaster-proof their homes, and start climate-resilient businesses. “Giving cash directly is an effective and scalable form of climate justice,” Hall added.

Presently, most of the countries responsible for the highest levels of carbon pollution don’t charge companies that ruin the planet. Governments let polluters do it for free. Historically, carbon taxes haven’t been very popular among the public because they worry it’ll increase their cost of living via their gas and energy bills. In 2018, the French erupted in mass protest when President Emmanuel Macron increased the carbon tax. That same year, voters in Seattle shot down a highly anticipated carbon tax proposal.

Nick Langridge, a graduate student at the University of Bath, says a basic income funded by carbon taxes could help the public be more accepting of them. And he doesn’t think governments should stop at taxing carbon pollution, either. They could also tax the ultra-wealthy and luxury goods. And why stop at funding only basic income programs? The public needs more than just cash—they need strong policies that can provide them with high-quality public transit and affordable healthcare and child care, too.

The list can go on and on. Universal basic income can accomplish plenty, but money alone won’t solve society’s inequities. “They’re not a silver bullet on their own,” Langridge said. But they’re certainly not a bad place to start.