An economy-wide carbon tax? It might be the gift we need

A Mexican fan enjoys the pre match atmosphere prior to the 2018 FIFA World Cup Russia group F match between Mexico and Sweden at Ekaterinburg Arena on June 27, 2018 in Yekaterinburg, Russia.
Matthias Hangst | Getty Images Sport | Getty Images
A Mexican fan enjoys the pre match atmosphere prior to the 2018 FIFA World Cup Russia group F match between Mexico and Sweden at Ekaterinburg Arena on June 27, 2018 in Yekaterinburg, Russia.

Soccer’s World Cup in Russia has provided many of us with sweet relief from the drumbeat of Brexit-related sound bites and Twitter rage.

But even as Westminster politicians head home for parliamentary recess and the long, hazy summer rolls on, the deafening countdown to leaving the European Union cannot be ignored.

Divorce bills, freedom of movement and border checks have monopolized headlines but what leaving the EU means to perhaps the greatest issue of our lives, climate change, has barely featured.

One of the arrangements that Britain is likely to leave following Brexit is the EU Emissions Trading System (ETS), the world's first major carbon market created to reduce greenhouse gases.

The European scheme has been considered successful although recent data suggest that emissions related to it actually rose in 2017, after falling for six straight years.

Daisy Gilardini | Image Bank | Getty Images

The U.K. itself can point to leadership in the bid to “decarbonize.” It heads an alliance of nations that are committed to moving the world to cleaner power sources and was the first country to impose legally binding targets on reductions in emissions.

Further, the U.K.’s own carbon tax was introduced in 2013 charging fossil fuel power plants and heavy users for their emissions. It sits as a top-up to the European scheme.

But what happens after the U.K. leaves the ETS, probably in 2021, remains unclear.

On Tuesday, a new report from the center-right think-tank Policy Exchange put forward its suggestion: tax the whole economy.

The paper argues the U.K. should widen its carbon tax from one based solely on penalizing power generators and heavy industry to a new set up that includes the firms that sell fossil fuels.

The report’s lead author, Matthew Rooney, said charging a levy on a miner or an energy company at the point where they sell the raw material would be the simplest and most effective way to discourage intensive carbon use.

The financial cost of emitting carbon is widely seen as far too low across the globe to spur levels of low carbon investment. Rooney argues a steadily rising tax set by an independent committee would increase the attractiveness of lower carbon options and the cash raised could be used to fund energy efficiency measures.

An offshore drilling and production platform.
Gary Tramontina | Corbis | Getty Images
An offshore drilling and production platform.

But when you tax the likes of Shell, you raise the costs to the whole economy and surely that must be a hard-sell to the public?

No problem, argue the Policy Exchange, which reckons this could be overcome in the form of a ”carbon dividend.” This annual lump sum would be paid directly to your bank account out of revenue gathered by the tax.

Each U.K. household would receive the exact same amount, benefiting lower income households that typically have a lower carbon footprint.

The paper argues this dividend would “lock in political and public support for fighting climate change,” rather than being viewed as punitive and regressive.

In a little over eight months Brexit will happen, and as we bicker toward the unknown it is perhaps time our elected representatives promised the public a little something.

A gift if you like, for all the endless hot air.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.