Revenue Recycling
How governments use carbon-tax revenue—through dividends, tax cuts, or clean-energy investments—to soften economic impacts.
What You Need to Know
Revenue recycling is the strategy for repurposing money raised by a carbon price. The approach determines who benefits, how affordable the policy feels, and whether the system stays revenue neutral.
Common Approaches:
- Dividends: Equal rebates to households (progressive, popular)
- Tax Cuts: Reduce income or payroll taxes (helps higher earners most)
- Clean Energy Investments: Fund transit, efficiency, and renewables (indirect household benefit)
- General Revenue: Money goes to the general budget (most regressive)
Design Considerations:
- Can the policy remain revenue neutral?
- How are low-income households protected?
- Will the plan maintain political support over time?
- What economic sectors receive reinvestment?
Smart recycling keeps carbon pricing fair, competitive, and publicly acceptable.
Sources & References
This information is sourced from authoritative government and academic institutions:
- treasury.gov
https://www.treasury.gov/initiatives/Pages/default.aspx
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Related Terms in Policy & Economics
Carbon Dividend
A policy that rebates carbon-tax revenue equally to households so most people receive more back than they pay.
Carbon Footprint
The total greenhouse gas emissions caused by an individual, organization, or product, measured in CO2 equivalents.
Carbon Offset
A reduction in greenhouse gas emissions or increase in carbon storage to compensate for emissions made elsewhere.
Carbon Tax
A government policy that charges emitters a fee for each ton of carbon dioxide they release into the atmosphere.
Electric Vehicle (EV)
A vehicle powered by an electric motor and battery pack instead of an internal combustion engine.
Energy Efficiency
Using less energy to perform the same tasks, reducing energy waste and costs.