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The benefit of a carbon tax is that no one has to calculate whether the lifetime vs production CO2 cost is greater; it shows up in the prices of either.



The downside of carbon tax is that it harms developing nations and the poor the most.


The impact on the poor is easy to fix: prebate everyone an amount of money equal to the poverty level energy consumption. It cancels the income effect while preserving the incentive to cut back on any marginal unit of CO2.




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