Citizens' Climate Lobby was established in the United States in 2007 to promote solutions to climate change. In particular, Citizens' Climate Lobby is focused on a solution called the Carbon Fee and Dividend policy.
There are four key components to the Carbon Fee and Dividend:
Carbon Fee: a fee is imposed on fossil fuels at source: at the well, the mine, or the port.
Steadily Increasing: the fee begins at $NZ20 per tonne in year one and then rises by $NZ15 per tonne every year thereafter.
Dividend: 100% of the revenue gained from the fee (after costs) is returned to the population pro-rata as a monthly dividend by direct payment (children receive 50% of the adult entitlement up to two children per household).
Carbon Leakage: measures are put in place to ensure emissions intensive trade exposed industries are not unfairly disadvantaged in international trade.
In New Zealand the Carbon Fee and Dividend policy could work alongside the Emissions Trading Scheme (ETS) to place an additional carbon price on fossil fuels, the core of the climate change problem. This would be similar to the situation in Europe where there is a regional EU ETS and a number of countries have implemented a carbon tax in parallel.
Carbon Fee and Dividend is supported by independent studies (see links in the footer) that show it offers significant benefits:
Effective: by providing a carbon price that steadily rises to a high level, the Carbon Fee and Dividend allows time for transition while causing a substantial and early impact on investment decisions. In the United States, Carbon Fee and Dividend is projected to reduce emissions by 40% in the first 12 years.
Good for people: In the New Zealand the average household is projected to receive annual dividends of around $1,800 per annum after ten years and most households would be better off even after price increases. There are also significant improvements in air quality.
Good for the economy: there are considerable economic benefits from the additional investment and dividend surplus which in the United States has been projected to increase both GDP and employment.
Non-partisan: the policy is a politically neutral solution.
Revenue neutral: as all revenue is returned to the population, the policy does not impact on government accounts and avoids the political complications associated with other forms of taxation. The costs of the scheme, which are relatively modest, are paid for out of the fees generated.
The Carbon Fee and Dividend has a number of advantages over other carbon pricing arrangements.
Progressive: unlike other forms of carbon pricing, the Carbon Fee and Dividend reduces inequality (because the dividends more than offset increased prices for most households, particularly those on low and middle incomes).
Rewards individual action: under a cap and trade system the cap is population-wide so that pollution foregone by one person will be transferred to another person. Under the Carbon Fee and Dividend, people who reduce their emissions can do so knowing their actions will decrease worldwide emissions.
Easily communicated: emission trading schemes are complex and not well understood by the general population. The Carbon Fee and Dividend policy is easily understood and the monthly dividends mean that any changes to the scheme would immediately be noticed by the entire population.
Certainty: The programmed, steadily increasing carbon price under Carbon Fee and Dividend is more effective at influencing investment decisions than the more volatile carbon price produced by emission trading schemes.
No offsets: The revenue is returned to the population rather than going to landowners as carbon credits. Emissions are reduced rather than being offset by trees that could one day be cut down (for example, due to a new disease).
Politically saleable: As most voters are financially better off, particularly those on low and middle incomes, it is a popular policy that can permit a higher carbon price, and therefore a bigger reduction in emissions, than is possible under less popular policies.
Carbon Fee and Dividend and similar policies are already established overseas.
Many carbon taxes are refunded: globally 44% of carbon tax revenue is refunded to taxpayers, in some cases through payroll taxes (a less pure version of Carbon Fee and Dividend).
Recently adopted in Canada: Canada has adopted the Carbon Fee and Dividend as the default option for provinces that did not implement their own carbon pricing regime by 1 January 2019. The first dividend payments in Canada were made in April 2019.
Introduced to Congress: The Energy Innovation and Carbon Dividend Act has been introduced as a bill into Congress and the Senate in the United States as a bi-partisan implementation of the Carbon Fee and Dividend.
Public reaction: the recent ‘yellow vest’ riots in France and the reaction in New Zealand to increased fuel taxes highlight the need for a fairer approach to carbon pricing.
Economist support: In the United States 3500+ economists, 27 Nobel laureates, all 4 former Fed Chairs, and 15 former Chairs of the Council of Economic Advisers have released a statement to unite behind carbon dividends as the bi-partisan climate solution.
In conclusion, the Carbon Fee and Dividend is a modern carbon pricing policy that has a number of advantages. The Carbon Fee and Dividend could work together with the ETS to place an additional price on fossil fuels, the primary cause of climate change, to substantially increase the speed of emissions reductions in New Zealand.