Using a Carbon Fee and Dividend: A Tool to Overcome the Climate Crisis

This past September, tens of thousands of people, including myself, sheltered indoors. Not just because of COVID mandates, but to escape the forest fire smoke engulfing the west coast. The sky was an eerie blood-orange and the air quality index exceeded 500, an extremely hazardous level. With the pandemic, the forest fires couldn’t have come at a worse time. For many of us, it became dramatically clear that climate change is something affecting our lives here and now – not in some future decade.

The National Oceanic and Atmospheric Administration (NOAA) reported that the summer of 2020 was one of the hottest on record for the U.S. This excessive heat contributes to forest fires, hurricanes, and threatens the things we value and need to survive such as water, energy, transportation, wildlife, agriculture, ecosystems, and human health. With these threats consuming our lives, people are finally waking up to the fact that climate change is upon us and we, as a civilization, need to act before it’s too late.

The goal set out in the Paris Climate Agreement, which President-elect Biden plans to rejoin, calls for no more than a 1.5 C increase in global temperatures by 2050 in order to avoid dangerous climate change events. According to a report by the Intergovernmental Panel on Climate Change (IPCC), countries will need to cut global CO2 emissions 45 percent below 2010 levels by 2030 in order to reach net-zero greenhouse emissions by 2050. The report suggests that the world will need a radical transformation of energy, transportation, and agricultural systems to meet this 2050 goal. Meeting this goal will be a serious challenge considering that solar and wind energy currently supply only about 9.8 percent of U.S. electricity production.

A new year is upon us and it’s time to reduce our fossil fuel emissions to meet the Paris Agreement goals. Given the fact that the U.S. is embroiled in a great political divide when it comes to issues like climate change, it’s hard to imagine how this country could come together to work on a common solution. Nevertheless, we need to develop solutions that will bridge this division in our society so that our civilization can move away from a fossil fuel economy to one based on clean, renewable energy.

Actually, there is such a solution. In 2018, the Energy Innovation and Carbon Dividend Act (HB763), a bipartisan bill, was introduced into the U.S. House of Representatives.  It died at the end of the session but was reintroduced into the 116th Congress. The bill was sponsored by Democrat Ted Deutch and cosponsored by Republican Francis Rooney. It would collect a fee of $15 per ton of carbon dioxide at the source from oil, gas, coal, and other greenhouse gases. The fee would be increased by $10 each year. All the revenue would be returned directly to American households as an equal, monthly energy dividend (or rebate). This approach is called the Carbon Fee and Dividend (CF&D).

The CF&D set forth in HB763 has been supported by the non-partisan organization Citizen’s Climate Lobby (CCL) since 2009. The CCL currently has 613 chapters and 195,000 active grassroots supporters across the country focused on passing Fee and Dividend legislation.

The CCL cites studies that show the positive benefits of the CF&D, including one by Regional Economic Modeling, Inc. (REMI) that shows that in 12 years such a fee system would lead to a 40% reduction in carbon emissions. Other studies, also done by REMI, estimate that the citizen’s dividend would stimulate the economy and add 2.8 million jobs after 20 years, more than if business continued as usual. In addition, the CF&D would have a dramatic effect on public health by reducing toxins emitted from fossil fuels and by reducing climate events such as storms and fires.

A price on carbon would encourage businesses and individuals to reduce carbon use.  With a higher cost of carbon, industries would be encouraged to reduce carbon use in the manufacturing process and, over time, to invest in the adoption of clean, innovative technology. As the carbon fees raise prices on carbon-intensive products, consumers would then buy products that use less carbon. Electric cars would be such an example.

Because of the Carbon Dividend, most people and households would come out ahead.  A 2020 Household Impact Study concluded that around 61% of households and 68% of individuals will get back more from the dividend rebates than what they pay in increased energy costs.

In order to make foreign trade comply with the carbon fees, there would need to be a border adjustment for products that are imported from countries without comparable carbon fees or pricing.  Likewise, as U.S. goods are exported to countries without carbon fees, they would receive a rebate.

In order to combat and defeat climate change in the next 30 years, our world civilization needs to do a lot more than setting up carbon fee and dividend systems. In particular, we need to do a great deal of work on regenerative agriculture so that our soils will capture and store carbon as organic matter. Of course, regenerative agriculture can be – and is – set up on an incentive basis which is a separate issue and project.

It is encouraging to know that a Carbon Fee and Dividend tool is available and that many people – from different points of view – are working to establishing and implement it.

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