Consider a road. As use of it increases, repairs to it are costing more and more. In response to that, the government puts a use tax on it, to pay for the repai

Consider a road. As use of it increases, repairs to it are costing more and more. In response to that, the government puts a use tax on it, to pay for the repairs. In response, all the people who need to drive on it to get to work get outraged. Why don't we charge the people who don't drive on it???!? It's unfair that we have to pay for it just because we use it! Hopefully you can see how that's ridiculous. And that directly parallels the carbon tax. The solution is to encourage behavior patterns that generate less carbon. That can mean moving to cities. It can also mean localities providing more public transit. Or labor negotiating more telecommuting options. A nice, non-distortionary way to deal with the problem is to take the tax, and either reduce other taxes equivalently (for every euro the carbon tax pulls in, reduce the VAT by one euro) or to just hand out the total proceeds of the carbon tax to everyone directly. The disincentive to pollute remains, so you still end up with a fairer economic system.