An international team led by the University of Leeds found that the poorest households would pay four times more as a proportion of their income towards a CO2 tax than high earners. This is due to the different ways these groups consume energy.

The researchers argue that a fairer way to tackle climate change would be to tax households on a range of greenhouse gases such as CO2, methane and nitrous oxide. Their findings are published this week in the journal Environmental Science and Technology.

An individual climate change tax is one of the instruments proposed by policymakers to ensure the UK hits its target of an 80% reduction in emissions by 2050. But the team, co-led by Dr Klaus Hubacek from the University of Leeds, show that a CO2-only tax scheme, would cost the poorest households 6% of their annual income while high earners would only pay around 2%.

This would mean a family with an income of £9,582 a year would pay £573 for a CO2 tax. Under a greenhouse gas tax (GHG tax), they would pay just £412 - a reduction of £161.

"Taxing people just on the size of their carbon footprint might seem like an obvious solution to climate change, but the economics show it's not that simple," said Dr Hubacek.  "In real terms, a carbon-only tax would cost more for poor families, who already struggle to meet the cost of utility bills.

"Under a GHG tax, poorer people would pay a smaller proportion of their income towards the tax without compromising a reduction in emissions, which would be fairer. Nevertheless, this isn't a perfect solution."

Despite leaving low income households better off, the researchers found that a GHG tax would still be regressive meaning that it imposes a greater burden on poor households than richer ones.

This disparity is partly caused by the different lifestyles of low and high income individuals. Poor households spend around 40% of their income on household costs such as heating and electricity compared to just 8% for high earners.

A GHG tax would shift the balance from carbon emissions to other gases, which would give relief to the poorest members of society.

"Food production alone generates a huge amount of methane, which is 20-times more potent than CO2 as a greenhouse gas," said co-lead Kuishuang Feng from the University of Leeds.

"Including methane in a broader GHG tax would shift the balance from household utilities to food, reducing the strain on poorer families. However, because a GHG tax it sill regressive, poor households may need to be compensated to make sure they are not unfairly penalised.

"One way the government could do this would be to reduce the rate of other taxes for these households, or to allow these families to use more carbon."

The team, which includes members from the Universities of York, Maryland, Cambridge and Berlin, and the Stockholm Environment Institute will now extend their model to investigate how the impact of the two taxes are determined by where people live and their surrounding infrastructure.

For more information

To arrange an interview with Dr Klaus Hubacek please contact Hannah Isom in the University of Leeds press office on 0113 343 4031 or email h.isom@leeds.ac.uk.

The paper, entitled 'Distributional effects of climate change taxation: the case of the UK', is published online in the journal Environmental Science and Technology (DOI: 10.1021/es902974g).

Notes to editors

The research did not consider any behavioural responses to the price changes and assumed the production structure to remain unaffected as well.