Carbon Fee and Dividend – Best for Lower and Middle Income

There are two very important election campaigns going on in North America at this time. Canadians will go to the polls on October 19 to choose their next government. Americans are just now entering their long electoral process culminating in November of 2016 when a new President will be chosen. Climate change and pricing carbon are important issues in both campaigns. I’m re-publishing this post about the Carbon Fee and Dividend which, in my view, is the best option for quickly involving the electorate in the carbon debate.

I’m a member of Citizens Climate Lobby – CCL (Ottawa, Canada). The material for this article has been sourced from Laser Talks featured on the CCL website. (Editor for BoomerWarrior~Rolly Montpellier). 

Carbon Fee and Dividend – Best for Lower and Middle Income

The Canadian Centre for Policy Alternatives, using income tax data from British Columbia, has determined that two thirds of Canadians emit average or less than average greenhouse gas emissions (5).

This is important because with carbon fee and dividend, every household receives the same amount of money in their dividend cheque, regardless of their emissions or income.

Thus, as you can see in the table below, middle and lower income Canadians would receive more in their dividend cheque than what they paid in carbon fees. Thus, with carbon fee and dividend, two thirds of households will come out even or ahead, especially those with lower incomes.

Another interesting statistic from the 2011 Centre for Policy Alternatives research was that the top 1% of households emitted three times more greenhouse gases than average and almost 6 times more than households in the bottom 10%.

In conclusion, carbon fee and dividend is a progressive carbon levy that will reward carbon-conscious consumers and protect people living on lower incomes as we transition away from a high carbon economy.

Table: Distribution by quintiles of family income ranges, household CO2 eq emissions & what percentage of the dividend cheque a family would receive relative to what it paid in fees.

Population distribution	Average	1st Quintile	2nd Quintile	3rd Quintile	4th Quintile	5th Quintile
Income Range (2)		up to 40,000	40 – 60,000	60 – 85,000	85 – 125,000	Over 125,000
CO2 eq (1)	13	8.6	11.1	12.6	13.5	15.5
Dividend received / fees paid (%)	100%	151%	118%	103%	96%	84%

 

The choice of instrument for putting a price on carbon will vary widely. There are two main types of carbon pricing: Emissions Trading Systems and Carbon Taxes. The choice of mechanism depends on the political and economic circumstances of each jurisdiction: country, province, state, city.

Citizens’ Climate Lobby advocates for the fee and dividend approach for two main reasons:

First, it’s probably the simplest carbon pricing option. The carbon fee would be implemented at the point of entry (well, mine, or port), and we already have a system in place to return the dividend to citizens during annual tax filings.

Second, it’s probably the most feasible option to implement, from a practical and political standpoint. The dividend offsets the cost of the carbon fee for most people, so there is minimal financial impact on the public. A carbon fee and dividend system has been implemented in British Columbia since 2008 with great success – the economy is doing well, emissions are down, and citizens have seen no net increase in taxes.

Canada (where I live) shamefully does not have a national carbon pricing policy nor a national energy plan. The Harper government is single-mindedly focused on the development of the Tar Sands, the world’s dirtiest and most toxic source of oil. The exception is British Columbia which implemented a revenue-neutral carbon tax in 2008. The BC economy is doing well, emissions are down, and citizens have seen no net increase in taxes – a true success story.

Putting a Price on Carbon – Its Time Has Come

Information gathered from three World Bank reports [1, 2, 3] indicate that governments around the world are taking action on the pricing of carbon. In 2014, about 40 national and over 20 sub-national jurisdictions have already implemented or scheduled emissions trading schemes or carbon taxes.

Together, these jurisdictions account for more than 22 percent of global emissions. Many more countries and jurisdictions are accelerating preparations for pricing carbon. Together, these represent almost half of global Greenhouse Gas (GHG) emissions [4].

Here’s the breakdown of what these countries are doing:

• 14 countries and one sub-national jurisdiction (BC, Canada) are implementing or have passed legislation for a direct carbon tax.
• 18 countries are taking steps to be in a state of “carbon pricing readiness” by 2016-2020.
• 35 countries (incl. 28 in the EU) and 20 sub-national jurisdictions have adopted emissions trading (ETS) programs.

Only two out of the ten largest economies in the world do NOT have a carbon price – the United States (with the exception of California which has an Emissions Trading Scheme) and Russia. In July 2014, India doubled its tax on coal to fund green energy projects.

References:

[1] Putting a Price on Carbon with a Tax. The World Bank. June 3, 2014.

[2] World Bank Background Note Carbon Pricing Readiness: Looking Ahead. The World Bank. June 3, 2014.

[3] Putting a Price on Carbon with an ETS. The World Bank. June 3, 2014.

[4] Statement: Putting a Price on Carbon. The World Bank. June 3, 2014.

[5] Behind the numbers: Who occupies the sky. The distribution of GHG’s in Canada on CO2 emissions  (November 2011) Canadian Centre for Policy Alternatives.

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Rolly Montpellier is the Founder and Managing Editor of BoomerWarrior.Org. He’s a Climate Reality leader, a blogger and a Climate Activist. Rolly has been published widely – Toronto Star, The Hill Times, Kingston Whig, the PEN, UnpublishedOttawa, Climate Change Guide, World Daily, Examiner, The Canadian, 350Ottawa, ClimateMama, MyEarth360, GreenDivas, The Elephant, Countercurrents, County Weekly News.

He’s a member of Climate Reality Canada, Citizens’ Climate Lobby (Ottawa) and 350.Org (Ottawa). You can follow him on Facebook, Twitter and Linkedin.