The Carbon Dividend: so why hasn’t this happened yet?

I’ve known that this concept existed for a while.  Now I’m starting to wonder why it’s not a bigger deal.  In its simplest form, the idea goes something like this: tax products that contribute to carbon emissions, then send every American a check with their share of the proceeds (estimated at $2,000 for a family of four).

There are some tricky topics, like how to protect American companies against rivals that don’t have to deal with this.  Or the basic question of what price to set the tax at ($43/ton is the proposed level starting in 2021).  And of course, you’d need a whole lot of infrastructure to monitor all this.  Still for the most part, it’s a pretty simple and effective solution to a really hard problem.

The most shocking thing about all this is that it has a ton of support (from all sides). Exxon-Mobil donated $1M to the effort (a token amount, but still).  Republican grandees are the most vocal and visible supporters of the plan.  55% of Republicans surveyed by the Climate Leadership Council and 58% of Democrats think it’s a good idea.  A lot of different kinds of people are saying that they are on board.

Which begs the question: why hasn’t this progressed farther?  What is there not to like about this plan?  Obviously, the answer lies in the fact that this topic is pretty toxic in normal political debate, so it’s always going to be hard for it to gain legislative traction.  But I also suspect that a lack of attention is part of the problem.

So here’s my attempt to lay out why I think more people should be rallying around this idea.

It will make American business stronger

This is the big one for me.  If you give American businesses a challenge to solve, the best ones will solve it.  Some of the not-so-great ones will go out of business or adopt the best ideas from the early innovators.  At the end of the day, America Inc. will be in better shape than they were before.

American businesses are not just going to throw up their hands and say: “oh well, guess we are just going to have to eat this carbon tax.”  No, they are going to find ways to reduce their carbon footprint to avoid as much of the tax as possible.

Why wouldn’t they; it becomes a competitive advantage, especially if everyone is subjected to the same rules ( no loopholes, please).  And other companies will spring up to help existing companies solve this problem.  More companies means more jobs, with everyone working towards an American economy that is less carbon-intensive (read: more efficient).

And it’s likely that businesses all around the world are going to have to get more economical in their use of energy over time.  This, in effect, creates a new American export industry; focused on selling our expertise to companies all around the world.

(Do some research on how many Dutch companies are advising coastal cities about dealing with threats from rising seas; we could have that on a much larger scale.)

And even if other countries’ companies never come calling, our companies would still be better positioned because they need less energy to create their stuff.  Lower costs means lower prices means more market share.

I think competitiveness and productivity is the big meatball with respect to why businesses will be better off, but it’s worth mentioning that this plan would replace a lot of the existing environmental regulatory framework.

So, in effect, companies no longer have to deal with red tape related to environmentalism or climate.  They just have to pay a tax.  So much simpler; to the point that this would reduce compliance costs to a significant degree for some types of companies.

It’s gradual, so there shouldn’t be a lot of disruption

The authors of the plan are talking about instituting this carbon tax starting in 2021 and having it gradually go up depending on the success of the emissions reductions.

2021 is still 3 years away.  3 years is a lot of time for companies to figure out a solution to this problem.

I’m not suggesting that everyone will have all their ducks in a row by then.  Of course it will takes decades for our entire economy to orient around energy efficiency as a driver of success in the market.

But no one is suggesting that we flip this switch tomorrow.  And in a world where leaders are shaking the foundations of supply chains and the corporate planning world, 3 years is going to seem like an eternity.

And because this is a tax, if someone isn’t ready with low- or no-carbon operations, they pay the tax.  Heck, if you truly had higher priorities as an organization, you could do nothing to prepare, cut the check, go on with your life, and prioritize lowering your carbon intensity when it makes sense for you.

I’m getting money

I would bet that the $2,000 yearly dividend check is going to turn a lot of heads, and if that gets people interested, that is great.  But frankly, in terms of a benefit to me, it’s not #1.

The reason? The dividend check is going to get eaten up to an extent by higher prices.  Companies are, in most cases, going to pass along at least some of the tax to customers in the form of higher prices.  That’s what they are doing with tariffs right now.

So in a world where no one does anything to adjust from this plan, the average person isn’t going to see a huge benefit.  If you, as a consumer, move yourself away from carbon-intensive stuff, then you would.  If you are someone who is an above-average user of carbon-intensive stuff, you might lose out financially.  (Partly, this comes down to the price at which the tax is set.)

And as companies use less energy, you would expect the amount of tax paid and therefore, the amount of the dividend to go down.

So it’s safe to say that the average person probably comes out about even, in purely financial terms, from this plan.  It would be great if I was legitimately getting $2k a year from this, but I don’t think that’s really how it would work out.

Now the big “but” here…the fact that we are discussing a real solution to climate change and I’m deciding whether it’ll be neutral or put me ahead financially.  That is huge.

Recent decades have shown that moving to a less carbon-intensive economy doesn’t have to come at the expense of growth.  I’ll repeat: we have a potentially huge contribution to the fight against climate change, and there is no indication that it will hurt the average American’s pocketbook at all.

I need to live on this planet for several decades

If not for politics, this idea would have been implemented already and I wouldn’t be writing this post.  But politics.

I mean, this is reason #1, far and away.  But for whatever reason, the well-being of “20 years in the future us” just doesn’t matter to “today us.”  \

The vision presented of 2040, which includes more storms, places drying out, mass migration, negative health effects (this list goes on), is just not something I feel proud of bestowing on my kids.

So we should celebrate the fact that this proposal could make the most significant dent in that future of any climate related proposal to date AND it’s not going to cost “today us” that much.  That is the really good news.

So can someone tell me: how can I help make this happen?

P.S. if you do want to get involved in this, apparently, you can sign up here.

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