There are lots of people who want to return money raised by a carbon program back to taxpayers via rebates.

(A “revenue neutral carbon tax” is one way to do this; “cap and dividend” is another; Obama’s proposal is to auction pollution permits and return roughly 80 percent of the revenue via payroll tax rebates.)

I have a very basic question for such folks.

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Say you put a price on carbon and rebate the revenue.

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Business costs rise, but they get that money back by raising prices for consumers.

Consumer costs rise, but they get that money back via rebates.

Who, in this scenario, has any new incentive to shift to low-carbon electricity or efficiency?

It’s like if we put a $5 monthly tax on NetFlix use, and then sent every NetFlix customer a $5 check each month. Who would ever rent any fewer movies? It looks like you’re just moving money around to no end. Can someone explain what I’m missing?

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