Carbon fee and dividend

The carbon fee and dividend approach to carbon pricing involves a revenue-neutral carbon fee where the revenues collected from a progressively increasing carbon fee are distributed in the form of dividends to households and individuals. This is advocated by the Citizens Climate Lobby in Canada (citizensclimatelobby.ca) and the US (citizensclimatelobby.org), and is supported by many prominent individuals including Bruce Hyer, MP-Green Party, Dr. James Hansen, Bill McKibben and Dr. Shi-Ling Hsu. In the US, Senators. Bernie Sanders (I-Vermont) and Barbara Boxer (D-California) introduced a fee and dividend legislation in 2013 with an introductory fee of $20/ton of carbon dioxide that would have increased by 5.6% each year for 10 years. The fee would be levied on 2,869 largest fossil fuel producers in the USA. The fee would be accompanied by a border tax adjustment to prevent carbon leakage. Sixty per cent of the revenues raised would be returned to every legal US resident, with the rest allocated for funding incentives for clean energy and research.1,2

The carbon fee and dividend approach proposed by the Citizens Climate Lobby is based on the “tons of carbon dioxide the fuel would generate.” This would be collected upstream, at the well, mine or port. The proposed fee and dividend would start at $15/ton and gradually increase by $10-15/ton each year.3

In Ontario, the Green Party of Ontario proposed a Carbon Fee and Dividend Act that includes a carbon fee of $25/ton of CO2 equivalent. The revenue from the fee would be placed in the Ontario Carbon Fees Trust Fund and rebated 100% to Ontario households. Rebates will be in the form of equal quarterly per-person dividends to Ontario households. The fee with be coupled with border adjustments. The fee will increase yearly by $25 per ton or more until Ontario's greenhouse gas emissions have been reduced to 10% of the province's 1990 levels.4

References

1.   Hymas, L. Sanders and Boxer introduce ‘fee and dividend’ climate bill; greens tickled pink. Grist at http://grist.org/climate-energy/sanders-and-boxer-introduce-fee-and-divi...

2.   Sanders, B. & Boxer, B. Climate Protection Act of 2013. (2013). at http://www.sanders.senate.gov/imo/media/doc/0121413-ClimateProtectionAct...

3.   Citizens Climate Lobby. Carbon Fee and Dividend FAQ. at http://citizensclimatelobby.org/carbon-fee-and-dividend-faq/

4.   Green Party of Ontario. AGM13P10 - Carbon Fee and Dividend Act. (2011). at http://www.gpo.ca/agm13/resolutions/policy/agm13p10-carbon-fee-and-divid...