Universal Basic Income Could Double Global GDP While Cutting Carbon Emissions

In a bold move that could transform the global economy and tackle climate change, researchers propose a universal basic income funded by carbon taxes. This plan promises to double global GDP and significantly cut carbon emissions, presenting a dual solution to economic inequality and environmental degradation.

The idea is simple: provide every person on Earth with a regular cash payment. This financial security, the study suggests, would trigger a ripple effect, boosting economic activity and leading to a more prosperous world.

The new analysis suggests that implementing a global basic income could increase the world’s gross domestic product (GDP) by 130%, while also reducing carbon emissions. The study proposes funding this ambitious initiative through a tax on carbon emissions levied on fossil fuel companies.

The researchers, led by U. Rashid Sumaila from the University of British Columbia, argue that coupling basic income with environmental protection could achieve significant global impacts. Sumaila, known for his work on ending harmful fishery subsidies, believes this approach can support sustainability without compromising livelihoods, particularly in developing countries.

Can Basic Income Become An Economic Engine?

The research estimates that providing basic income to the entire global population of 7.7 billion people would cost $41 trillion. Alternatively, targeting only the 9.9 million people living below the poverty line in less developed countries would require only $442 billion.

No matter how you look at it, a universal basic income scheme is exorbitant. The potential economic return, however, is substantial. Basic income for the global population could boost GDP by $163 trillion, which is about 130% of the current global GDP. This economic uplift is particularly crucial during times of crisis, such as recessions, when basic income can act as a stabilizing force, the researchers note.

 “If you give someone one dollar, they will spend part of the money to buy food or pay rent. And people that are paid for the food and accommodation will use part of this for their own consumption and so on. The dollar will trickle up throughout society. Our calculations show that the economic impact of that dollar will be much greater than its original amount,” Sumaila says.

Although the proposition suggests that a universal basic income scheme pays for itself, this probably won’t be the case in its early phase because economic development takes time. To fund the basic income program, the researchers suggest several options, including a tax on CO₂ emissions. They estimate that such a tax could generate approximately $2.3 trillion annually, sufficient to provide a basic income for all individuals living below the poverty line in less developed countries. Other potential funding sources include a plastic pollution tax and redirecting subsidies from harmful industries like oil, gas, and agriculture.

The Challenges Are Huge

The concept of basic income is not without its critics. Concerns about reduced work incentives, potential inflation, and administrative challenges are common. However, evidence from existing basic income programs, such as Alaska’s Permanent Fund Dividend, suggests that these fears may be overstated. Studies indicate that basic income can, in fact, enhance part-time employment and boost entrepreneurship by providing a financial safety net.

Additionally, the national cash transfer program in Iran, which began in 2011, provided monthly cash payments equivalent to 28% of median per capita household income. Studies found that this program did not reduce labor force participation. Instead, it had positive effects on the labor supply, particularly for women and self-employed men. This indicates that basic income can support workforce engagement rather than hinder it.

Another common concern is that basic income could lead to inflation. Critics argue that increased purchasing power without a corresponding increase in goods and services could drive prices up. However, the study notes that the impact on inflation is likely to be moderate. Evidence from smaller cash transfer programs suggests that basic income has no significant effect on inflation.

The study also highlights the positive impact of basic income programs in places like Indonesia, where villages receiving basic income experienced lower deforestation rates. Similarly, grants in Namibia significantly reduced illegal hunting and trespassing for the simple reason that not as many people were desperate for any income.

However, implementing a global program presents logistical challenges — but they’re not insurmountable. Existing social protection programs already manage similar tasks, and innovations in information and communications technology can facilitate basic income implementation. For example, mobile money transfers are widely used in low-income countries, demonstrating that reliable delivery mechanisms can be established even in regions with limited financial infrastructure.

By far, the hardest part of this scheme is securing international cooperation for carbon taxes or other funding mechanisms.

Sumaila acknowledges the challenges in implementing such taxes but stresses the importance of holding polluters accountable. “It’s not easy to implement carbon taxes, but that doesn’t stop our academics from reporting the evidence we have. Polluters should pay for the damage they cause,” he says.

Basic income could also enhance societal resilience to crises, such as pandemics or natural disasters. Sumaila notes, “During COVID-19, governments worldwide scrambled to support people who suddenly lost their income. With basic income in place, such emergency responses wouldn’t be as necessary.”

The findings appeared in the journal Cell Reports Sustainability.