Week in Insights: A Carbon Tax That Pays Is a Political Winner

Carbon taxes are intended to internalize externalities by making the polluters pay to clean up their mess and then redistributing the proceeds to society through goods or services. But this connection often isn’t clear to taxpayers when carbon tax revenue is tossed into coffers with all other revenue.

The process is much clearer in Austria. The country took a major step to foster a greener economy last year by introducing the Klimabonus. This initiative is funded by the revenue from a new carbon tax and channeled directly to residents through annual payments. Everyone who lives in Austria for at ...