As proposed by the Climate Leadership Council
1. A Gradually Increasing Carbon Tax
The first pillar of a carbon dividends plan is a gradually rising tax on carbon dioxide emissions, to be implemented at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port. Economists are nearly unanimous in their belief that a carbon tax is the most efficient and effective way to reduce carbon emissions. A sensible carbon tax should begin at $40 a ton and increase steadily over time, sending a powerful signal to businesses and consumers, while generating revenue to reward Americans for decreasing their carbon footprint.
2. Carbon Dividends For All Americans
All the proceeds from this carbon tax would be returned to the American people on an equal and monthly basis via dividend checks, direct deposits or contributions to their individual retirement accounts. In the example above of a $40/ton carbon tax, a family of four would receive nearly $2,000 in carbon dividend payments in the first year. This amount would grow over time as the carbon tax rate increases, creating a positive feedback loop: the more the climate is protected, the greater the individual dividend payments to all Americans. The Social Security Administration should administer this program, with eligibility for dividends based on a valid social security number.
3. Border Carbon Adjustments
Border adjustments for the carbon content of both imports and exports would protect American competitiveness and punish free-riding by other nations, encouraging them to adopt carbon pricing of their own. Exports to countries without comparable carbon pricing systems would receive rebates for carbon taxes paid, while imports from such countries would face fees on the carbon content of their products. Proceeds from such fees would benefit the American people in the form of larger carbon dividends or could be used for transitional assistance for industries or regions hurt by the carbon tax. Other trade remedies could also be used to encourage our trading partners to adopt comparable carbon pricing.
4. Regulatory Simplification
The final pillar is the elimination of regulations that are no longer necessary upon the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends. Many, though not all, of the Obama-era carbon dioxide regulations could be safely phased out, including an outright repeal of the Clean Power Plan. Robust carbon taxes would also make possible liability rationalization for emitters. To build and sustain a bipartisan consensus for a regulatory rollback of this magnitude, however, the initial carbon tax rate should be set to significantly exceed the emissions reductions of all Obama-era climate regulations, and the carbon tax should increase from year to year.