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Pitch

Carbon Fee & Dividend: A steadily rising fee on CO2-emitting fuels, all revenue returned to households, people-centered emissions reduction.


Description

Executive summary

Carbon → Fee → Dividend → Simple

The conventional wisdom on action to reduce carbon emissions is that it must be expensive, harmful to the economy, and result in less productive power generation. The fee and dividend approach makes clear that we can build virtuous economic impacts into the carbon-pricing system, from the outset.

All systems of carbon taxation or carbon emissions capping operate on the principle that applying economic pressure in a targeted way can inspire markets to change their behavior. This is the very logic of market-based economic systems.

The logic of a carbon fee and dividend model is that it rescues ordinary consumers, and our wider civilization—which is dependent on a relatively stable global climate system—from the unwise, backward-thinking model of the least cooperative profit-making businesses: 

  • A fee is applied at the source of any carbon-based combustible fuel, per ton of CO2 emissions potential from that fuel;
  • 100% of the revenues are returned to households, to cope with the penalty the affected industries will attempt to pass on to consumers;
  • A WTO-safe border adjustment for nation without a similar policy would be instituted to ensure a level playing field for American businesses.

Most households will see no net rise in their energy costs, and the monthly dividend check they receive will effectively insulate them against price hikes. Because the fee steadily increases over time, consumers will soon see a marked economic benefit in buying cheaper non-carbon-emitting renewable fuels, and industry and investors will follow with their money and infrastructure.

Team

The Carbon Fee and Dividend proposal was put together by a team of people working with Citizens Climate Lobby, a non-partisan, non-profit organization, based in the US and with groups in Canada as well. 

What

  •    Fee on carbon-emitting fuels, at the source (mine, well, port of entry)
  •    100% of revenues returned, in equal shares, to every household, every month
  •    Non-protectionist border adjustment, to ensure level playing field & promote international adoption
  •    Power over energy economy returned to consumers
  •    Major energy-sector investment flows to clean, renewable resources 

Why: Rationale for the proposal

The fee and dividend approach will spur major new private-sector investments in carbon-free renewable energy sources and the development of a smart energy infrastructure designed to optimize the output and efficiency of an electric vehicle transport economy based on clean energy resources. Entrepreneurs and investors will come flying off the sidelines to support the most significant public-private investment in infrastructure in more than half a century.

The resulting job creation will spur an economic boom that will not only help the nation restore the balance of capital and strengthen the middle class, but also push more wealth through the consumer economy, benefitting those firms that are positioned to take advantage of an industrial, transport, energy and consumer boom economy. With a carbon fee and dividend approach, we can make sure that only those interests that refuse to innovate and to improve their standards of operation for power generation pay for falling behind.

And, the US economy will be able to liberate itself from the volatile speculation of fossil fuels markets and a perilous dependency on the whims of hostile foreign oil-producing states. Because of its geographical diversity, industrial capacity and dynamic consumer economy, the United States is better positioned than any other nation on Earth to take advantage of the clean energy transition, to be a genuine world leader in the economic standard for resilience and growth in the 21st century.

Just three states (Texas, Kansas and North Dakota) have enough wind energy potential to power the entire domestic US economy (transport, consumer and industrial), if the infrastructure is built. Other Great Plains states (Oklahoma, South Dakota, Nebraska) have an unprecedented opportunity to both complement that power generation potential and to build industrial capacity to supply the power generation infrastructure of the region.

Industrial powerhouses, like mining giant Rio Tinto, automotive manufacturer GM, power grid operators and electricity suppliers, are positioned to see windfall gains coming in, if they are able to build or supply the new market infrastructure. Disused and exhausted mines are already being converted to wind and solar, and in places like Coal River Mountain, West Virginia, evidence already points to the more lucrative potential of clean energy resources. 

In mountain states, throughout Appalachia, there is potential for something never before achieved: for the rapid acceleration of building new economic infrastructure, including opportunities for better-paid work, more prosperous communities and long-term economic resiliency. Local leaders in business and industry can benefit from benefitting their communities, sharing in the shift in economic priorities, and securing more reliable revenue streams than those available from geologically intermittent, often hard-to-reach veins and reservoirs of carbon-based minerals.

In each of these new hotspots, there is a double potential for investment/output gain: first by building and managing the clean energy infrastructure, second by achieving the export capacity needed to deliver power through the smart grid to major urban centers of energy consumption. The chief myth regarding the transition to a clean energy economy is that renewable energy is too intermittent to be viable and that urban centers demand too much energy for clean renewables to meet demand. That myth can be described as the baseload-impossible myth.

Baseload power is the resource or resources that are considered the stable foundation for a power supply grid. In fact, the Department of Energy and Department of Defense have both begun transitioning to a model wherein future planning relies on the breakthroughs that have shown clean renewables can be more reliable and more affordable than high energy-content fossil fuels. The Secretary of Energy has said the entire idea of baseload power sources is outdated, as smart-grid technology means any abundant resource can achieve reliable universal power supply.

A report by the American Solar Energy Society and Management Information Systems found that the direct job creation potential of wind and solar is 4.6 and 5.4 jobs per million dollars of output, respectively, while oil and natural gas produce just 0.8 jobs per one million dollars in output, and coal just 1.9.

A joint report from the Center for American Progress and the University of Massachusetts at Amherst's Political Economy Research Institute, on the benefits of clean energy shows that the renewable energy and energy efficiency sectors together could account for 37 million jobs by 2030. Compare that to the 9 million the oil and natural gas industries say they now support directly and indirectly.

Conventional wisdom about the inviability of a carbon-fee-induced transition to this new, more vibrant, economic landscape, is rooted in the perception that unless every major corporation is able to keep its own costs at a minimum, the middle class consumer economy will fail. The job creation boom is the evidence that such analysis is flawed and disingenuous: it is the major market players that will benefit if they adjust to an environment in which a wealthier, more resilient middle class is able to fund and benefit from the green economy boom.

The carbon fee and dividend proposal will give very real, very significant, investment opportunity to communities, states, major industrial players and small start-ups, and it will build a new era of prosperity into the American economy by building the middle class and infusing the consumer economy with a viable long-term domestic energy-production model more efficient and scalable than any other yet conceived.

How: Feasibility of proposal

The carbon fee and dividend model for emissions reduction relies on national governments to institute a simple, straightforward law, with the fee assessed through their existing system of taxation (no new bureacracy needed), returning 100% of all revenues directly to households, in precisely equal amounts, regardless of income. Ideally, there would be no need for variation, as the fee is assessed at one end of the economy (the source for carbon-emitting fuels) and the dividend is returned to the other end of the economy (the end-users, whose activity makes up the consumer economy). 

  • Because the fee and dividend plan includes a non-protectionist border adjustment, any nation that enacts it incentivizes all of its trading partners to institute a similar policy. Any collaborative diplomatic negotiations could help to foster a balanced, non-protectionist, non-distorting framework for simultaneous implementation of a carbon fee and dividend plan, spanning regions, continents, or the globe. 
  • Some governments may seek to capture some of the revenue. The plan is designed to avoid this, by issuing monthly checks for the full amount of the fee. Setting up a sealed "trust fund" that could only be used for specific types of emissions-reducing investments would be one way to allow some governments in unique circumstances to make the adjustments necessary, without drawing the carbon fee revenue away from the overall project of reducing emissions, correcting for negative externalities from carbon-emitting fuels, and speeding the transition to an affordable, sustainable, consumer-centered clean-energy economy. 
  • Because they are the most scalable, solar and wind power would likely see a major boost from new flows of private capital to low-carbon energy. The fee and dividend plan relies on the incentive for carbon-fuels purveyors to innovate and to adopt clean energy, on consumer behavior, selecting more affordable clean energy sources, and on private capital flowing to the major new opportunities for investment in low-carbon energy sources. 
  • Citizens Climate Lobby is a grassroots, non-partisan organization, already working in the US and Canada to move this policy into place. CCL citizen volunteers meet with members of the US Congress, the Canadian Parliament, with people of all ideological tendencies, political affiliations and levels of influence. CCL volunteers also meet with editorial boards of newspapers, and consistently publish in print media, to help move the discussion regarding climate mitigation strategy in the direction of pragmatic, consumer-friendly, clean-energy-focused solutions for phasing out carbon emissions. 
  • The CCL strategy for citizen-based non-partisan grassroots lobbying will go beyond the work of inviting and supporting legislative action on the carbon fee and dividend plan. CCL, its volunteers and like-minded civil society organizations can build partnerships across the world to help strategize, plan for and develop the clean-energy-focused policies that will create the best economic outcome for all stakeholders. 

Vision of the future under this proposal

If Carbon Fee and Dividend is adopted, the economy can be well on its way to transitioning away from fossil fuels within a decade, and establish majority clean-energy supply within two decades. Instrumental to the implementation of the fee and dividend plan, and to the smart-grid-based clean-energy economy that will follow is the active participation of citizens in all levels of the economic development and redevelopment process.

Civil society organizations that are able to advise policy makers are already giving voice to stakeholders at the global economic policy table. A localized, sustainable, smart-energy economy, based on distributed power generation models, collaborative storage and distribution and the participation of local actors will have the effect of decentralizing the prevailing market logic for major capital investments in energy and in related sectors of the economy. 

As individuals, families, small businesses and local communities, take control of the power generation infrastructure, the logic of investment, regulation, taxation and even national defense, will shift, to advantage the methods and resources that most efficiently provide people with energy, information, and mobility. The economic adjustments that will accompany a consumer-focused transition to clean energy will have the concurrent effect of promoting education, participation, civil society infrastructure, and a market-logic that prioritizes the dignity of human beings and their right to live free of overweening negative externalitiesenvironmental degradation. 

The process of economic development should make sense for all people, not only for those well positioned to derive the biggest rewards. The best way to make that possible is to empower people to take control of their energy and environmental destiny, and that requires a transition in the cost-benefit logic relating to how we price fossil fuels and new competitors capable of building a more sustainable world.