Conference Agenda

Carbon taxes are a crucial policy option for curbing carbon emissions1,2, but can deepen poverty and inequality, posing challenges for achieving a just transition. Revenue recycling is proposed to offset these regressive impacts3–5, yet practical implementation issues remain largely unexplored1. Here, we investigate the effectiveness of various revenue recycling mechanisms—both domestic and international, with an emphasis on social assistance-based recycling—and different carbon taxation structures using a Social Accounting Matrix-based model. Our findings indicate that paring a luxury consumption tax (applying higher tax rates on luxury goods) with revenue recycling through an expanded social assistance system as happened during the COVID-19 pandemic could achieve the most substantial reduction in extreme poverty. This approach proves the best option for most countries (109 out of 168). Furthermore, establishing a global carbon tax revenue fund financed by developed nations and distributed to developing countries based on poverty headcounts could markedly reduce poverty and inequality both within and between countries. However, substantial improvements in social assistance systems are urgently needed, especially in Sub-Saharan African countries. Overall, this study provides a viable pathway for synchronising carbon mitigation with poverty alleviation, contributing to the development of equitable climate policy.