Editor's note

When the Rudd government scrambled to respond to the economic crisis in 2008 it employed an insight from behavioural economics: people value cheques paid into their accounts much more than they value tax cuts.

It was an insight the Gillard government failed to employ three years later when it designed its emissions reduction scheme. Most proceeds from the carbon price were to be fed back to households as tax cuts rather than payments. After a short time the tax cuts went unnoticed.

Tonight in Sydney newly elected independent Kerryn Phelps will unveil a plan that promises to do what Gillard’s short-lived scheme did not. Designed by UNSW economics professor Richard Holden and law professor Rosalind Dixon, and outlined in The Conversation this morning, it would distribute all of the proceeds to households as direct payments worth A$1,300 per adult per year, tax-free.

Holden and Dixon say that after paying the resulting higher prices for energy, the average household would be $585 a year better off – more so if they cut their use of energy.

It feeds into a debate that will continue when Labor releases its energy election policy on Thursday.

Peter Martin

Editor, Business and Economy

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The UNSW climate dividend proposal will be launched on Wednesday by the Member for Wentworth Kerryn Phelps. Shutterstock

Fresh thinking: the carbon tax that would leave households better off

Richard Holden, UNSW; Rosalind Dixon, UNSW

It is possible to both tax carbon emissions and enrich households. A report to be released by UNSW today outlines how.

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