The Four Pillars of a Carbon Dividends Plan
I. A Gradually Increasing Carbon Tax
The first pillar of a carbon dividends plan is a gradually increasing tax on carbon dioxide emissions, to be implemented at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port. Economists are nearly unanimous in their belief that a carbon tax is the most efficient and effective way to reduce carbon emissions. A sensible carbon tax might begin at $40 a ton and increase steadily over time, sending a powerful signal to businesses and consumers, while generating revenue to reward Americans for decreasing their collective carbon footprint.
II. Carbon Dividends for All Americans
All the proceeds from this carbon tax would be returned to the American people on an equal and quarterly basis via dividend checks, direct deposits or contributions to their individual retirement accounts. In the example above, a family of four would receive approximately $2,000 in carbon dividend payments in the first year. This amount would grow over time as the carbon tax rate increases, creating a positive feedback loop: the more the climate is protected, the greater the individual dividend payments to all Americans. The Social Security Administration should administer this program, with eligibility for dividends based on a valid social security number.
III. Border Carbon Adjustments
Border adjustments for the carbon content of both imports and exports would protect American competitiveness and punish free-riding by other nations, encouraging them to adopt carbon pricing of their own. Exports to countries without comparable carbon pricing systems would receive rebates for carbon taxes paid, while imports from such countries would face fees on the carbon content of their products. Proceeds from such fees would benefit the American people in the form of larger carbon dividends. Other trade remedies could also be used to encourage our trading partners to adopt comparable carbon pricing.
IV. Significant Regulatory Rollback
The final pillar is the elimination of regulations that are no longer necessary upon the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends. Much of the EPA’s regulatory authority over carbon dioxide emissions would be phased out, including an outright repeal of the Clean Power Plan. Robust carbon taxes would also make possible an end to federal and state tort liability for emitters. To build and sustain a bipartisan consensus for a regulatory rollback of this magnitude, the initial carbon tax rate should be set to exceed the emissions reductions of current regulations.
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 each of the 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. For example, there may be significant differences in how the dividends are administered and in the appropriate level of regulatory rollback.