Carbon Fee and Dividend: A Necessity for a Transformational Economy

Originally published by Roger Kuhns and Anne Schmidt on April 28th, 2016 in the Door County Pulse.

We’ve watched a nation transform from wood to coal for energy, and now to oil and natural gas. In a matter of a few short years we saw hybrid cars go from a pipe dream to ho-hum technology.

Some of these changes were driven by technological discoveries; others by regulation and incentives, all thrived because they produced profits. Our next transformation must come in the weaning of the world from fossil fuels, and the way to do it is through a carbon fee and dividend.

The U.S. relies on fossil fuels for 86 percent of its energy, with petroleum (40 percent), coal (23 percent), and natural gas (23 percent) leading the way. Nuclear energy comprises just eight percent of our energy needs, but is in decline, while renewables comprise six percent and rising.

This carbon-based economy has accelerated climate change, and we’re already experiencing many unintended consequences. We must fix the problem beginning with greenhouse gas emissions, taking us right to the core of the issue – reducing our use of fossil fuels.

On March 4 we had the good fortune to speak with one of the world’s most influential climate scientists and foremost proponents of the carbon fee and dividend, Dr. James Hansen. Hansen, the former head of the NASA Goddard Institute for Space Studies, presented his latest work at the Citizens’ Climate Lobby Mid-Atlantic Regional Conference at Arcadia University near Philadelphia.

“How can justice be achieved for young people if we don’t put everything we’ve got into fixing this carbon problem?†Hansen said. “It is all about climate change, because it affects everything. I think we need a science-based national climate recovery plan to achieve 350 ppm carbon dioxide [it is now 400 ppm] in the atmosphere by 2100. But we’re up against a massive fossil fuel industry defense.â€

The carbon fee and dividend model is an innovative structure that puts a true cost on fossil fuels while providing incentives to the population to reduce their use.

Hansen stressed that the UN’s Framework Convention on Climate Change and the 2015 Conference Of Parties (COP21) agreement won’t work unless nations apply a carbon fee on greenhouse gas emissions.

That’s where the Citizens’ Climate Lobby (CCL) comes in. The CCL is a not-for-profit grassroots organization lobbying members of Congress to support a carbon fee and dividend bill.

The CCL-proposed carbon fee is a not a tax. A tax represents monies collected by the government and used for government’s functions. A fee is collected by the government and given back to U.S families.

That’s right, the fee is returned to U.S. families as a monthly check (Hansen’s estimate puts this at $2,400 per year to start). This could be used to help offset fossil fuel price increases passed on by energy companies during the years of transition toward a sustainable economy. Lower-income families, who use fewer fossil fuels in vehicle and air travel and utilities, could see a net profit even after price increases, while those with huge homes and large travel expenditures would pay the true cost of their activities.

“The only way the carbon fee works, where we get support from most of the members of Congress, is if all the money goes back to the people in the form of a dividend,†explained CCL Executive Director Mark Reynolds.

The fee would incentivize people to use fossil fuel-intensive activities less often, and push companies toward innovative technologies for powering with renewables and nuclear sources, just as they produced high-mileage vehicles, electric cars, and hybrids.

“You can’t stop each [fossil fuel] source independently – that won’t work,†Hansen said. “A rising carbon fee will incentivize the private sector to innovate renewables and replace fossil fuels.â€

A first-year fee of $15 per ton of carbon dioxide would be applied to all fossil fuel producers at the point of production, and would be increased $10 per ton annually if a carbon fee and dividend bill were to be passed by congress.

This means the fee is collected at the wellhead for oil and natural gas, at the mine site for coal and tar sands, and at the port of entry for imported fuels from non-U.S. produced fossil fuels on the basis of the contained carbon in the product. This simplifies compliance because the government would not track individual carbon emitters – such as each of the 7,300 power plants and 137,400 manufacturing sites nationwide. The program would collect an estimated $600 billion annually from the fossil fuel producers once the $100 per ton carbon dioxide fee is achieved. Management costs are estimated at three to seven percent of the collected fees. This means no new taxes are levied on families, and no new government funds are required for program operations.

“A carbon fee and dividend can result in a 50 percent reduction in carbon emissions in 20 years,†Reynolds says. â€Nothing else will do that, and the U.S. has to be the leader.â€

Hansen stressed the moral imperative of changing our approach.

“Without a carbon fee and dividend we will experience continued amplified climate change feedback, and we hand our children a world that is running out of control,†he said.

The carbon fee and dividend plan is self-financing, good for American families, and good for the future of America’s economy, communities and environment.