‘A wonderfully clear-headed account of how we can fight both climate change and widening inequality: consumers pay higher prices proportional to their carbon footprints but get the money back in the form of dividends in equal payments to every man, woman, and child. If there’s to be a Green New Deal, this is the kind of policy we’ll need.’
‘Carbon dividends are key to dealing with the threats of a changing climate. Read this book to learn about an important part of the solution to this looming problem.’
‘Boyce makes clear the one climate policy that would work: ‘carbon fee and dividend.’ The public will love it - it puts money in their pocket. Young people should demand it, to save their planet and their future.’
‘The threat of climate change is real. But action is still too little, too late. This book provides a bold and disruptive idea that could shape the new wave of policy and action on climate change. It would be ambitious, leading the world to drastically cut emissions, and also equitable, ensuring cooperation in action.’
‘Congress must act to stop the rising damage and costs of climate change – and that action must be based on sound scientific research. The carbon cap and dividend approach is a simple and fair way to require polluters to pay and put the money into the pockets of American taxpayers. And thanks to Professor Boyce’s research, we know just how effective it can be.’
‘This crisply written book makes a compelling – and highly accessible – case for using carbon pricing to tackle the twin challenges of our time: climate change and income inequality. Covering the science, the markets, and the politics, Boyce argues that a carbon dividend strategy is simple, effective, and fair. Regardless of where one falls in the nuances of the climate policy debate, this is a gem of a volume.’
‘Hooray for James Boyce’s The Case for Carbon Dividends. In clear and compelling English, it explains the carbon pollution challenge and makes the case for citizen dividends as a straightforward solution. Too many global warming debates proceed in highly technical terms, leaving regular citizens – rightly – worried that they will pay the price for new taxes and rules. But carbon dividends – equal remittances from carbon tax revenues sent to every American man, woman, and child each year – are easy to understand, impose more costs on rich households that currently use more dirty energy, and would leave most working and middle-class families as net winners. This primer should kick start many community debates, because it tells us exactly how the United States can make rapid progress toward a green economy and become a more equal democracy in the process.’
‘This is the best thing ever written on the subject. Clear, eloquent and irrefutable, it’s a must-read for all concerned with surviving the 21st century.’
‘People fight climate change when they believe in a solution. Boyce’s guide to carbon dividends is the indispensable guide for what’s big, bold, fair and strong enough for the job. We need this book!’
‘We define the atmosphere as a common property resource, so we can understand carbon dividends as payments by users of the resource to its owners – this is economic democracy. James Boyce uses principles of equity and economic efficiency to build a practical strategy to address climate change.’
Sam Pizzigati, The Case for a Maximum Wage
Louise Haagh, The Case for Universal Basic Income
James K. Boyce, The Case for Carbon Dividends
polity
Copyright © James K. Boyce 2019
The right of James K. Boyce to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2019 by Polity Press
Polity Press
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Cambridge CB2 1UR, UK
Polity Press
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Suite 300
Medford, MA 02155, USA
All rights reserved. Except for the quotation of short passages for the purpose of criticism and review, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.
ISBN-13: 978-1-5095-2658-1
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Names: Boyce, James K., author.
Title: The case for carbon dividends / James Boyce.
Description: Medford, MA : Polity, 2019. | Series: The case for | Includes bibliographical references and index.
Identifiers: LCCN 2018057103 (print) | LCCN 2018061138 (ebook) | ISBN 9781509526581 (Epub) | ISBN 9781509526543 (hardback) | ISBN 9781509526550 (paperback)
Subjects: LCSH: Carbon offsetting. | Carbon offsetting--Economic aspects. | Carbon offsetting--Law and legislation. | Emissions trading. | Emissions trading--Economic aspects. | BISAC: POLITICAL SCIENCE / Public Policy / Economic Policy.
Classification: LCC HC79.P55 (ebook) | LCC HC79.P55 B69 2019 (print) | DDC 363.738/746--dc23
LC record available at https://lccn.loc.gov/2018057103
The publisher has used its best endeavours to ensure that the URLs for external websites referred to in this book are correct and active at the time of going to press. However, the publisher has no responsibility for the websites and can make no guarantee that a site will remain live or that the content is or will remain appropriate.
Every effort has been made to trace all copyright holders, but if any have been overlooked the publisher will be pleased to include any necessary credits in any subsequent reprint or edition.
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To address climate disruption we need insights drawn from science, public policy, and political economy. The key challenge is to curb our use of fossil fuels. The key to cutting fossil-fuel use is to put a price on carbon emissions. And the key to a viable carbon pricing policy, this book argues, is to return carbon revenue to the public as equal per-person dividends.
To succeed, we will need a climate policy that is sustainable politically as well as environmentally. The environmental requirement is widely translated into the target of cutting carbon emissions by at least 80 percent against their 1990 level by the middle of this century. Finding a comparable formula for the requirement of political sustainability has been a more elusive goal.
We will need a policy that can secure public support broad and deep enough to endure for the decades that will be required to complete the clean energy transition. To be this durable, the policy must be capable of winning robust support across the political spectrum.
Past climate policy strategies all too often have started from the premise that cutting our use of fossil fuels will demand sacrifices by the present generation for the sake of future generations. This premise has been shared by climate policy proponents and opponents alike. By failing to craft climate policies that would benefit the majority of people in the present generation – and in the same countries that implement the policy – this “eat your broccoli” narrative has fatally circumscribed the political constituency for climate action.
A crucial element in climate policy is a carbon price that will raise the cost of fossil fuels and everything produced and distributed by using them. A carbon price can be implemented by means of a tax, a cap-and-permit system, or a combination of the two. In the short run, the carbon price reduces demand for fossil fuels. In the long run, it creates strong incentives for investments in energy efficiency and alternative energy. Carbon pricing faces a major political hurdle, however: how to secure public support for a policy that substantially raises fuel prices for consumers.
This book presents a policy that can meet this challenge: carbon dividends. A price-and-dividend strategy returns the money that consumers pay in higher fossil-fuel prices directly to people in the form of equal payments to every woman, man, and child. The amount that consumers pay in higher prices is proportional to their carbon footprints, so those who consume more fossil fuels pay more. The carbon dividend is paid equally to all, based on the principle of common ownership of our environment – in this case, the environment’s limited capacity to absorb carbon emissions safely. Individuals with bigger than average carbon footprints pay more than they get back, while those with smaller than average carbon footprints get back more than they pay.
This is an example of a “feebate” policy: individuals pay fees according to their use of a shared resource and receive rebates by virtue of its common ownership. The concept can be illustrated by means of the following analogy. Imagine that 1,000 people work in an office building whose parking lot has only 300 spaces. If everyone thought they could park for free, the result would be chronic excess demand and congestion. To avert this outcome, a parking fee is charged that constrains demand to fit the lot’s capacity. Every month the money collected in parking fees is distributed as equal rebates to everyone who works in the building. Those who take public transport or cycle to work come out well ahead: they pay nothing and get their share of the revenue. Those who carpool to work break more or less even. And those who commute to work every day in a single-occupancy vehicle pay more into the revenue pot than they get back. Carbon dividends apply this idea to parking fossil carbon in the atmosphere.
Because everyone receives the same dividend, regardless of his or her own carbon footprint, all have an incentive to reduce fossil-fuel consumption. Because carbon footprints are correlated with income and expenditure, they are strongly skewed to more affluent households. So the majority of households – including lower-income and middle-class families – come out ahead in simple pocketbook terms, without even counting the policy’s environmental benefits.
Carbon dividends, deposited monthly or quarterly into individual accounts, would be a highly transparent way to distribute carbon revenue. A price-and-dividend policy would be revenueneutral, bypassing paralyzing debates about the optimal size of government. And, because everyone pays according to their use of the scarce resource and receives dividends based on its shared ownership, the policy would be widely perceived as fair.
It is hard to imagine any other climate policy that could secure and sustain broad-based public support in the face of significant escalation in the price of fossil fuels.
The Case for Carbon Dividends offers a succinct explanation of why we need carbon dividends and how they would work. The book consists of four chapters followed by answers to some frequently asked questions.
Chapter 1 makes the case for curtailing our use of fossil fuels. The case rests first and foremost on the role of carbon emissions in driving climate disruption. But there are other compelling reasons to cut carbon, too: to improve air quality and public health and to spur employment-intensive green growth. These benefit the present generation within the same countries that cut their emissions, providing gains in the here and now that, along with carbon dividends, can help surmount the shortsightedness and international cooperation obstacles that have impeded effective climate action.
Chapter 2 lays out the case for carbon pricing. First, I discuss why this is a vital element in the policy mix; while it is not a substitute for regulation and public investment, it is a necessary complement to them. Second, I outline how a carbon price can be put in place by means of either a cap or a tax, or by a policy that combines the attractive features of both. Third, I discuss why carbon pricing is best implemented by means of an upstream system in which the price is charged where fossil fuels first enter the economy.
Chapter 3
Chapter 4 makes the case for distributing most or all of the carbon revenue to the public as equal per-person dividends. Dividends offset the regressive impact of carbon pricing, turning it into a progressive policy in its impact on income distribution. Like universal basic income, carbon dividends would help to mitigate the problem of wide and rising income inequality. At the same time, universal dividends can help to foster an ethic of shared interests and shared responsibilities in an era when divisiveness is emerging as a peril to pluralist societies.
To illustrate the distributional impacts of carbon prices and dividends, the book focuses on the United States, which among advanced industrialized countries is both the largest emitter of carbon and the hardest nut to crack politically. But the basic finding applies worldwide. In every country, a carbon price-and-dividend policy that devotes a substantial share of the carbon revenue to equal per-person dividends would have a positive net effect on the incomes of the majority of its people, including the poor and the middle class. Furthermore, these income gains accrue regardless of whether or not other countries institute comparable policies. For this reason, national price-and-dividend policies can provide a stepping stone to an international climate accord rather than making national climate policy dependent on international agreements.
The case for carbon dividends, in short, is that they are the most effective and equitable way to confront the greatest environmental challenge of our time.