The Four Pillars of Our Carbon Dividends Plan
(Updated September 2019)
I. A GRADUALLY RISING CARBON FEE
Economists agree that an escalating carbon fee offers the most cost-effective climate policy solution, sending a powerful price signal to steer businesses and consumers towards a low-carbon future. Accordingly, the first pillar of our bipartisan plan is an economy-wide fee on CO2 emissions starting at $40 a ton (2017$) and increasing every year at 5% above inflation. If implemented in 2021, this will cut U.S. CO2 emissions in half by 2035 (as compared to 2005) and far exceed the U.S. Paris commitment. To ensure these targets are met, an Emissions Assurance Mechanism will temporarily increase the fee faster if key reduction benchmarks are not achieved.
II. CARBON DIVIDENDS FOR ALL AMERICANS
All net proceeds from the carbon fee will be returned to the American people on an equal and quarterly basis. A family of four will receive approximately $2,000 in carbon dividend payments in the first year. This amount will grow as the carbon fee increases, creating a positive feedback loop: the more the climate is protected, the greater the dividend payments to all Americans. According to the U.S. Department of the Treasury, the vast majority of American families will receive more in carbon dividends than they pay in increased energy costs. The popularity of dividends will help ensure the longevity of a bipartisan grand bargain based on these pillars.
III. SIGNIFICANT REGULATORY SIMPLIFICATION
The third pillar is the streamlining of regulations that are no longer necessary upon the enactment of a rising carbon fee. In the majority of cases where a carbon fee offers a more cost-effective solution, the fee will replace regulations. All current and future federal stationary source carbon regulations, for example, would be displaced or preempted. This regulatory simplification will be contingent on the continued presence of an ambitious carbon fee. Trading regulations for a carbon price will promote economic growth and offer companies the certainty and flexibility they need to innovate and make long-term investments in a low-carbon future.
IV. BORDER CARBON ADJUSTMENT
Carbon-intensive exports to countries without comparable carbon pricing systems will receive rebates for carbon fees paid, while carbon-intensive imports from such countries will face fees on the carbon content of their products. A well-designed system of border carbon adjustments will enhance the competitiveness of American-based firms that are more energy-efficient than their foreign competitors, while preventing carbon leakage and free-riding by other nations. This will put America in the driver’s seat of global climate policy and encourage other large emitters – such as China and India – to follow America’s lead and adopt carbon pricing of their own.
APPLYING THE CARBON DIVIDENDS FRAMEWORK TO OTHER COUNTRIES
As an international research and advocacy organization, the Climate Leadership Council will adapt this carbon dividends framework to other leading greenhouse gas emitting countries and regions. With certain adjustments, the four-part framework outlined above offers a cost-effective, popular, and equitable climate solution for most major countries outside the United States. Each country, of course, will need to adapt this framework to fit its system of government and national circumstances. There may be, for example, significant differences in how the dividends are administered and in the appropriate level of regulatory simplification.