The Government Should Write Everyone a Check—Paid for by a Carbon Tax

A carbon tax and dividend could curb greenhouse gas emissions while improving quality of life for many.

Owen Poindexter August 16, 2019

(Design by Matt Whitt)

For decades, we have been told that fight­ing cli­mate change will hurt the econ­o­my. But there is an ele­gant pol­i­cy idea that fights cli­mate change and pover­ty at the same time: A car­bon div­i­dend, which would impose a steadi­ly ris­ing car­bon tax and return the rev­enue to the pub­lic as uni­ver­sal and equal cash pay­ments. This would be a tremen­dous force in reduc­ing car­bon emis­sions while pro­vid­ing a sub­stan­tial increase in pur­chas­ing pow­er to the least well-off peo­ple at lit­tle to no cost to the nation­al bud­get. We can and should take oth­er dra­mat­ic steps against cli­mate change, but we can start with one pol­i­cy that pro­vides an incred­i­ble bang for its buck.

A universal carbon dividend would include those who often miss out on other benefit programs, such as unemployed people and those who don’t file taxes.

Sev­er­al states as well as the U.S. House and Sen­ate have active or recent car­bon div­i­dend bills, and they pro­vide a good tem­plate. The fed­er­al bills call for a fee on fos­sil fuel com­pa­nies for the use, sale or trans­fer of fos­sil fuels. The toll, in the bills, would start at $15 per met­ric ton of car­bon and rise $10 a year indef­i­nite­ly. The U.S. would also impose a bor­der adjust­ment tax on any imports from coun­tries with low­er (or no) car­bon tax­es, so as not to advan­tage imports or incen­tivize com­pa­nies to relo­cate. Cor­po­ra­tions, par­tic­u­lar­ly those that extract fos­sil fuels, would pre­sum­ably pass the cost of these tax­es on to proces­sors and oth­er mid­dle­men, and even­tu­al­ly con­sumers, rais­ing the price of ener­gy and ener­gy-inten­sive goods. On the sur­face this looks bad for con­sumers — but what are the upsides?

Sim­ply put: A high­er car­bon price shifts con­sumer, com­pa­ny and investor behav­ior toward envi­ron­men­tal­ly friend­ly prac­tices. Solar pan­els would make more eco­nom­ic sense for con­sumers and unnec­es­sary dri­ving and fly­ing would make less. Large cor­po­ra­tions, from Ama­zon to Star­bucks, would be incen­tivized to oper­ate on clean­er ener­gy. Investors would look toward new forms of ener­gy gen­er­a­tion and effi­cient mate­ri­als. An analy­sis by Region­al Eco­nom­ic Mod­els Inc. (REMI) esti­mates this type of leg­is­la­tion would low­er car­bon emis­sions to 50% of 1990 lev­els with­in 20 years, near­ly putting the U.S. on pace to meet the Paris Cli­mate Accord tar­get. The cor­re­spond­ing reduc­tion in air pol­lu­tion would pre­vent 230,000 pre­ma­ture deaths over that time.

Sig­nif­i­cant increas­es in the price of ener­gy could push many con­sumers to the break­ing point, but there is a sim­ple and pow­er­ful solu­tion to this pol­i­cy issue.

REMI found that a uni­ver­sal div­i­dend could reach $300 a month with­in a decade, vir­tu­al­ly ensur­ing every low-and mid­dle-income per­son — oth­er than those employed in a few select sec­tors, name­ly oil and coal — would end up with the same or more in their bank accounts despite the tax. Pur­chas­ing pow­er should also steadi­ly increase, espe­cial­ly at the low­er income quin­tiles, from the div­i­dend and a pro­ject­ed two mil­lion addi­tion­al jobs. A dra­mat­ic reduc­tion in fos­sil fuel extrac­tion would decrease the amount of the div­i­dend, but this would be a good prob­lem to have — and could be addressed by addi­tion­al rev­enue sources (e.g., a wealth tax) for the dividend.

The fact that a div­i­dend reach­es every­one dif­fer­en­ti­ates it from oth­er green eco­nom­ic ini­tia­tives like a stand-alone green jobs pro­gram. If we instead direct­ed the new car­bon fee rev­enue to pub­lic works and clean ener­gy sub­si­dies, then those work­ing-class peo­ple who are not employed in clean ener­gy or con­nect­ed sec­tors, many of whom are already bare­ly stay­ing above water, would see prices rise with lim­it­ed off­set­ting assis­tance. We should still pur­sue such projects — paid for through the gen­er­al fund — but they are no replace­ment for a div­i­dend that reach­es every­one. Indeed, a rev­enue-neu­tral car­bon div­i­dend is not mutu­al­ly exclu­sive with oth­er pro­gres­sive pri­or­i­ties, and can be sym­bi­ot­ic with a Green New Deal.

As the car­bon fee ris­es, the div­i­dend total will as well, and could rise from a few hun­dred dol­lars for a fam­i­ly of four to a few thou­sand dol­lars annu­al­ly. For every­one, this will at least help off­set the increased cost of trav­el and var­i­ous goods. For the work­ing class, this mon­ey could become a sig­nif­i­cant form of assis­tance. Cash div­i­dends have been shown to improve health­care met­rics, school atten­dance, peace of mind and oth­er proso­cial fac­tors, and have no sig­nif­i­cant effect on employ­ment or sub­stance use. As a uni­ver­sal pro­gram, a car­bon div­i­dend would include those who often miss out on oth­er ben­e­fit pro­grams, such as unem­ployed peo­ple and those who don’t file taxes.

Oil CEOs, air­line exec­u­tives and oth­ers who live off the abil­i­ty to pol­lute for free may not like a car­bon fee and div­i­dend, but the rest of us would enjoy a pro­gres­sive­ly health­i­er envi­ron­ment with a lit­tle extra spend­ing money.

For alter­nate per­spec­tives on a car­bon tax, check back to InThe​se​Times​.com on Monday.

Owen Poindex­ter is a free­lance writer and co-host of the Basic Income Podcast.
Limited Time: