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Carbon Income by Dennis Peterson

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Fund basic income with carbon fees



A leading proposal for carbon pricing is "fee-and-dividend." Major source emitters such as coal mines pay a fee per ton of carbon, and pass the cost to consumers. The money is distributed to citizens, at an equal amount per capita. Anyone whose total emissions are less than the national average would profit.

Since the rich emit much more CO2 than the middle class and poor, a majority of citizens would profit. To drive this point home, build a website that estimates an individual's carbon emissions. Let the user add a carbon fee per tonne, and calculate his monthly profit or loss.

Since the majority of citizens agree that global warming is a problem, showing that carbon legislation is also in their immediate financial interest may help garner broad public support.

In addition, there's growing public awareness that "robots are taking our jobs." Over the next few decades, we can let automation build either a utopia for everyone, or a dystopia in which a small elite thrives while the rest barely survive. To avoid the latter, there's increasing support for "basic income," providing a fixed monthly check from the federal government to each adult citizen regardless of need. 

Basic income has a lot in common with our carbon dividend. By using carbon fees as the revenue source for basic income, we can motivate a much higher fee than would otherwise be possible. 

However, public support is no longer sufficient, given the undue influence of corporate lobbyists and pressure groups, made much worse recently by Supreme Court decisions. This problem combined with the immense financial power of the fossil fuel industry makes action unlikely.

Therefore, we have to fix our democracy. We should use several approaches in parallel, including the SuperPAC, range voting, algorithmic redistricting, politicians pledged to vote in accordance with local direct democracies, and a constitutional amendment initiated either by Congress or by an Article V Convention called by the states. 

What actions do you propose?

Most discussion of carbon pricing focuses on its cost. Meanwhile, an entirely separate discussion proposes giving a fixed basic income to every citizen, without means-testing. That money has to come from somewhere. Why not carbon fees?

With a focus on cost, meaningful carbon fees seem unattainable. $10/ton carbon is considered a good start, and $100/ton fairly high. But on the other side, basic income proponents suggest we pay $10,000 per year to every citizen. With average per-capita emissions of 20 tons CO2 per person, that amounts to a fee per ton of CO2 of $500, or $1500 per ton carbon, which is higher than even the most aggressive carbon fees proposed.

And while nations balk at setting carbon fees unless all other nations do the same, nobody thinks that way about basic income.

Let's change the conversation.

Fee and Dividend

The Fee and Dividend plan has been advocated by a number of economists, and notably by James Hansen in his book Storms of My Grandchildren. It would be simple to administer, requiring only that we count the tons of fossil fuel produced at major sources, such as coal mines and oil wells, and charge a standard (but rising) fee per ton. Divide the total by the number of citizens and pay an equal amount to each adult, with a smaller amount per child.

To avoid disadvantaging domestic manufacturing, at least in local markets, a corresponding tariff can by applied to imports from countries with no comparable fee. Tariffs for environmental purposes are legal under WTO rules.

There's no cap, no trade, no offsets, and no net government revenue. Politicians who've signed the "Koch pledge" can happily vote for fee-and-dividend, since the pledge only prohibits carbon fees that increase revenue.

Costs are predictable for industry, and incentives are straightforward. (By contrast, cap and trade actually puts a floor on emissions, since the price of carbon credits collapses if emissions drop below the cap, and offsets have sometimes been abused.)

A similar carbon fee was implemented by British Columbia, and proved to be both effective and popular.


There are many carbon footprint calculators on the web, but most only calculate fuel and electricity usage. We also need to account for the carbon impact of purchased products. A calculator that does this is the CoolClimate calculator at Berkeley. To find out how you would fare under the Basic Carbon plan, find out your total carbon footprint with this calculator. Multiply that by your proposed carbon fee (per ton CO2) to get your annual direct cost, including the price increases in products you buy. Multiply the fee by the U.S. average of 20 to get your annual income from the plan.

CoolClimate has an API, and encourages people to build new websites using it. This would be a convenient way to build an integrated Basic Carbon site showing people their net result.

Basic Income

According to The Economist, 47% of all jobs will be automated by 2034. No government is prepared for this.

Aside from this problem, many people have advocated basic income for a variety of other reasons. It could replace many means-tested welfare programs, such as food stamps.

A recent experiment in Mexico tried just giving money to the poor instead of food. It worked well and cost less. Basic income could greatly reduce government bureaucracy, replacing it with simple software. It would also eliminate the "poverty trap," where people with means-tested benefits are better off staying unemployed. These factors have helped basic income gain support from some prominent conservatives and libertarians.

Getting people out of poverty can save money more directly. A study in Florida found that spending $10,000 per person to get the homeless off the streets can save $31,000 per person in other costs, such as medical and law enforcement. Contrary to popular opinion, if we simply give them the money they tend to spend it wisely.

The homeless of course have quite low carbon emissions, so an annual carbon dividend of $10,000 would be quite helpful.


Even if the general public decides this is a good plan, corporate control of Congress may keep it from ever being enacted. We need to restore our democracy. Here are several ideas for doing that, some already in progress.

Recent court decisions such as Citizens United have allowed SuperPACS to be funded without limit by corporations. The SuperPAC, founded by Lawrence Lessig, takes donations from the general public, with a goal of electing reform-minded politicians in targeted districts. It has raised over $7 million so far. That pales in comparison to the $181 million spent by corporate donors over two years, but it's a good start.

PlaceAVote is a system for taking votes from citizens on issues, in cooperation with politicians who pledge to vote accordingly when there's a clear decision.

Preserving a free, open internet will be critical. This is an ongoing battle. Of particular note is the current push to preserve net neutrality by pressuring the FCC to reclassify internet service under Title II.

Range voting would make elections better reflect the will of the voters, and open up space for third parties, while eliminating the "Ralph Nader problem" for major parties. It's compatible with current law and voting machines. A good way to start might be in third-party primaries, or local primaries in major parties.

Setting district boundaries by computer algorithm, instead of letting politicians do it, would help reduce the enormous advantage held by incumbents who draw "safe" districts for themselves.

To overturn court decisions on campaign finance, we may need a constitutional amendment. One idea is to abolish corporate personhood with respect to the First Amendment. An amendment can be proposed either by Congress, or by an Article V convention organized by the states. Either way, 3/4 of states must vote to ratify it.

The first three of these actions are already underway, and the next three obviously longer-term. But the threat of more significant actions can sometimes prompt politicians to be more amenable to reason. For example, while an Article V convention has never occurred, at least four amendments were proposed by Congress at least partially in response to the threat of a convention.

Aside from all this, we may be able to find some corporate allies for a carbon fee. The reinsurance industry might be a good place to start. Big agriculture might be another.


Eventually of course, we hope that our carbon fee will eliminate carbon emissions. When that happens, the revenue source for basic income will disappear. While this is a good problem to have, it does mean we'll want to find another revenue source. Perhaps one option would be public investment in renewable and nuclear power plants.

Who will take these actions?

Getting this enacted will require a major political movement by the general public. Perhaps if the climate and basic income advocates join forces, along with democratic reform groups, it can happen.

What challenges will be faced in implementing this proposal and how will they be overcome?

How much will emissions be reduced or sequestered vs. business as usual levels?

According to William Nordhaus in A Question of Balance, the DICE model predicted that a fee per ton carbon starting at $144 in 2005, and rising to $763 in 2105, would limit global temperature rise to 1.5 degrees C (p. 92). We're ten years late already, and more time will pass before we get started. Even so, a fee of $1500 per ton carbon ($500/ton CO2), attained in a much shorter time frame, should be quite effective as long as we get started before irreversible feedbacks kick in.

What are other key benefits?

We touched on the benefits of basic income above, but much more information can be found at the r/basicincome FAQ.

What are the proposal’s costs?

Economist Ed Dolan calculated that the U.S. could pay for an annual basic income of $5850 simply by eliminating most means-tested welfare and middle-class tax exemptions, without additional revenue. This gives us some wiggle room. If we don't want to raise the carbon fee enough for the level of basic income we want, we could help pay for it by eliminating exemptions or less-efficient welfare programs.

On the other hand, a 2008 study by MIT students found that the U.S. emits 8.4 tons CO2 per person for public services. The taxes that pay for those services would have to go up to pay for increased carbon prices.

To take an example, suppose we charge $500 per ton CO2. Basic income from that is $10,000 per person. Government will spend an additional $4200 per capita on services, but could eliminate perhaps $2000 per capita in means-tested welfare spending. We'll get additional savings by helping the homeless off the streets.

While it may be imprudent to impose such a fee all at once, phasing it in over the course of, say, 20 years should be feasible, given the counterbalancing savings. Public support should be strong once the program starts and most people find that they really are coming out ahead.

Time line

Politics is notoriously unpredictable, but as more jobs are lost to automation, support for basic income is likely to increase. It's likely that support for climate action will as well, now that its effects are beginning to be felt. Perhaps we could enact the plan in five to ten years, and phase it in over the next decade or two.

Related proposals

A winning 2014 proposal by CitizensClimateLobby advocates fee-and-dividend.


See links above.