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'Climate Dividends': Donating 5% of Carbon Taxes to Poorest Countries Can Help Cut Poverty

By Sonia Elks

LONDON, April 27 (Thomson Reuters Foundation) — Handing 5% of the money rich nations raise from carbon emissions charges to sub-Saharan Africa would counter the impact of rising prices on the world's poorest people, researchers said on Tuesday.

More and more wealthy countries are seeking to impose emissions charges on companies, but doing so risks pushing up the price of essential goods, which hits the poor hardest, said a study published in the journal Nature Communications.

The researchers said that risk could be mitigated by handing the proceeds to households in the form of "climate dividends" and donating 5% to the poorest countries.

"You can create this win-win situation where you can reduce emissions and at the same time achieve a reduction in poverty," said lead author Bjoern Soergel, of the Potsdam Institute for Climate Impact Research (PIK).

"It's so simple — there's no need to do very elaborate targeting, but it's really giving back to everyone," he told the Thomson Reuters Foundation in a telephone interview.

Many countries are turning to "pay to pollute" carbon pricing schemes that push industries to go green by increasing the cost of using dirty fuel.

But these also threaten to undermine efforts to eradicate extreme poverty — defined as living on less than $1.90 a day — as they push up the cost of food and other essentials, said the paper's authors.

The study found introducing emissions charges in every country to limit global warming would by 2030 push 50 million people into extreme poverty, with Sub-Saharan Africa worst hit.

"If money is actually transferred to poor and vulnerable households and that's done effectively then that really does support poverty alleviation and development," said Jem Woods, an expert in sustainable development at Imperial College, London.

However, they would have to be "monitored and policed" strictly to ensure they were effective which could make them far more difficult to apply in practice, added Woods, who was not involved in the study.

The study's calculations do not take into account the COVID-19 pandemic, which the World Bank has said will lead to a sharp rise in new poor.

Green groups have backed climate dividend schemes that return the proceeds to the people, saying they boost economies and help tackle poverty since low-income groups typically get back more than they pay in increased costs.

Switzerland and Canada have both adopted carbon tax policies that return some of the income collected to households.

(Reporting by Sonia Elks @soniaelks; editing by Claire Cozens. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)