Arguments over carbon taxes go back as far as discussions of climate change itself. Economists have long insisted that pricing carbon is the most efficient way to reduce greenhouse gases. For years, they hijacked the climate discourse, with untold money and effort put behind proposals for various increasingly baroque pricing schemes, to very little effect.
Over time, political experience with carbon taxes has highlighted a truth that should have been obvious long ago: carbon taxes are taxes, and people don’t like taxes. People don’t like paying more money for stuff.
More broadly, carbon taxes are an almost perfectly terrible policy from the perspective of political economy. They make costs visible to everyone, while the benefits are diffuse and indirect. They create many enemies, but have almost no support outside the climate movement itself. All the political intensity is with opponents. (More here.)
One response to this critique that has grown increasingly popular in recent years is the notion of refunding the tax revenue — giving the money back to voters. Various ways to do this have been proposed, the simplest being an equal dividend to each taxpayer. Some proposals have all the tax revenue refunded; some have a limited portion refunded.
The idea is that the tax would discourage carbon-intensive activities, while the dividend would mute political opposition. In most of the proposed schemes, the lower half of the income scale comes out ahead — dividends are larger than tax burdens — and in some cases, up to 80 percent of taxpayers come out ahead. A refunded carbon tax is basically large-scale wealth redistribution from the biggest fossil fuel users to middle- and working-class citizens.
This kind of “fee and dividend” framework is endorsed by the Climate Leadership Council (centrist/bipartisan elites), the Citizens’ Climate Lobby (left-leaning grassroots campaigners), and one-time presidential candidate Andrew Yang, though they differ on important details.
The logic of the policy is compelling to proponents — and to many people who first hear about it — and they feel deeply confident that it will compel the public too. The evidence, however, is mixed.
Do refunds increase the popularity of carbon taxes? At last, some field research.
There are numerous studies showing that, in a polling or focus-group setting, the inclusion of refunds increases public support for a hypothetical carbon tax — see hereand here, among others. But that kind of polling has not translated into victories in, for example, Washington state, where a fee-and-dividend policy lost badly in a public referendum in 2016.
More to the point, because there have been so few fee-and-dividend policies implemented in the real world, there’s been very little field testing of the public’s actual response to it.
That brings us to a new paper in the journal Nature Climate Change by political scientists Matto Mildenberger (UC-Santa Barbara), Erick Lachapelle (University of Montreal), Kathryn Harrison (University of British Columbia), and Isabelle Stadelmann-Steffen (University of Bern). They do something novel: look at public opinion in the places where carbon fee-and-dividend policies have been implemented.
It turns out there are only two.
Switzerland established a rebate program in 2008. The carbon tax reached 96 Swiss francs (about $105) per tonne in 2018; about two-thirds of the revenue is rebated on a per-capita basis, with everyone (including children) receiving an equal share.
In short, the available evidence suggests that carbon refunds don’t do much to reshape public opinion on carbon taxes, even among voters with accurate information about the refund they receive.
Perhaps support for these policies will increase over time. Perhaps it would increase if voters didn’t receive just one-time information about refunds, but consistent, repeated information. Perhaps it would increase if the rebates were sent via check rather than buried in bureaucratic documents. (We’ll find out about this — Canada is switching to a checks-by-mail system this summer and researchers are planning more surveys.) Perhaps support would grow if the rebates substantially increased in size.
We can’t know what would happen in these counterfactuals; anything is possible. We can’t know whether some sort of carbon refund scheme might catch on and grow popular at some point. But the current evidence is fairly discouraging for the thesis that rebates will ipso facto increase support for carbon pricing.
The lessons of this research
There was a popular theory among pundits (myself included) when the Democrats took control of the federal government in 2020: the one thing you can’t propagandize voters on is their own lives. If Democrats could improve voters’ social and economic circumstances in tangible ways, it would cut through the disinformation haze and increase public support.
In retrospect, I think that was naive. You can propagandize voters about their own lives. Or, to put it more academically, all of our experiences, even our experiences of our own life circumstances, are mediated. We interpret them through schema and worldviews shaped by our tribes and the stories they tell. These days, we get that stuff through electronic media, with which the world is saturated.
Most people are not aware of exactly how much they pay in gas or carbon taxes a year. Most people do not closely scrutinize their tax returns or health insurance forms. And above all, most people are unaware that they already receive a variety of government benefits, which are often buried in the tax code or otherwise hidden from view. (The best book on this is Suzanne Mettler’s The Submerged State: How Invisible Government Policies Undermine American Democracy.)
Outside of a focus group, out in the real world, people’s assessments of a carbon refund are less likely to be informed by careful economic cost-benefit analysis than they are to be mediated by identity affiliation. And these days, identity has been subsumed by partisanship.
“[I]n the two federal-tax provinces, supporters of the Liberal Party of Canada were 3 to 8 times more likely to support the carbon tax than Conservative Party supporters,” the paper reports. “Similarly, in Switzerland, left-leaning voters were 48% more likely to support rebates relative to right-leaning voters.”
Thanks for sharing David Robert's piece today. No doubt this will stir up a lot of engagement online and a note from CCL's Communications team:
If people reference the article, instead of getting pulled into a back and forth about the merits of the policy, this is an opportunity for us to say "yes, and." Make it a conversation about partisanship informing people's opinion of any climate solution, rather than a back and forth about the policy, and use it as an opportunity to reinforce the value of CCL's bipartisan approach. For example, “Interesting, it seems that partisanship is a big factor in whether people like the policy or not. That's part of why CCL works in a bipartisan way to build support all across the political spectrum.”
It's also important to note that the article's logic applies to any other climate policy out there (not just for carbon fee and dividend) and that one of the main reasons CCLers advocate for a dividend is not just to make it a popular, but to ensure that the policy isn't regressive and a drag on the economy.
Additionally, there is plenty of additional research out there that demonstrates carbon fee and dividend policies can be popular. Polling shows again and again that carbon pricing has strong support among voters.
I don't know much about Dave Roberts, but it seems as though he's been a long-time skeptic of carbon fee and dividend, which doesn't mean he's necessarily wrong. And the article explicitly discusses some of the points I've wondered about, with some detail from public opinion in Canada and Switzerland. I can well imagine these points are strongly influencing the Senate reconciliation package negotiations over climate as we write, especially in the face of high inflation and energy prices.
But I take heart that apparently neither country yet has provided the dividend in monthly checks--hence our recent focus on “carbon cash back" for the general public who will likely not absorb the nuanced policy details of “dividend.” He does acknowledge that possibility. After a quick read, I see three points to consider.
Though he says that regulatory approaches have made a meaningful difference in global carbon emissions, it's not nearly enough, fast enough.
It's possible that if CF&D were widely implemented, it might be far faster and more effective than regulations. Economic studies predict that it's likely, but we won't know until we try at a larger scale than just Canada and Europe.
As we're seeing in the U.S., regulatory approaches are just as prone to tribal objections as any other approach. I don't see tribalism per se as reason to accept or reject any workable proposal to reduce carbon emissions, as the tribe most likely to object refuses to accept that any action is necessary at all, and so all measures are wrong.
Finally, thanks Brett for your guidance on this. It helps steady me in advocating for non-partisan acceptance of CF&D as the approach most likely to make the kinds of carbon reductions we desperately need.
One takeaway from the Roberts article may be that we should continue to emphasize different arguments when speaking to liberals and conservatives. If dividends don't make a difference to conservatives then maybe talking about free-market forces driving innovation, revenue neutrality and keeping government small will.
In a sense, carbon refunds are the latest expression of a long-time technocratic dream: that a policy can be so sensible, such a net benefit for so many people, that it will transcend politics. It will argue for itself and its logic will be irrefutable.
I'm not a paid subscriber to Dave Roberts' newsletter, but someone should tell him that carbon dividends don't argue for themselves. WE argue for them.
I also think it's interesting that he says, “Nothing is experienced directly by voters, not even money showing up in their bank account.” Except that the two “dividend” examples they showed weren't money showing up in people's bank accounts. They were rebates on health insurance or tax returns.
This statement also runs contrary to what we all experienced from the covid relief stimulus checks. Twitter blew up when stimulus checks started hitting people's bank accounts. We even got slang for it--a "stimmy." If we implemented something like that for a carbon dividend in the US, isn't it possible the reaction would be different than a line item on a document?
Ultimately, Roberts seems like he's got an axe to grind, which--as Scott said--doesn't necessarily make him wrong. However, it does make it difficult to tease out his actual points that are worth weighing.
I do follow and usually admire the work of climate and energy journalist and commentator David Roberts, who wrote for Vox prior to starting his own newsletter, Volts. I've appreciated and used his writing on fossil fuel subsidies and electrification in my advocacy — though, as a committed CCLer, I certainly disagree with his assessment of carbon taxes. He is from Seattle and often cites the failure to pass state-level carbon tax proposals in Washington as a primary reason he believes it is politically infeasible.
Scott Buckley is absolutely right about Dave Roberts' longtime skepticism on carbon taxes--at least since 2010--when I first started reading him daily at Grist.
1. Until 2014 or 2015, Roberts rarely, if ever, commented on a c-tax with a DIVIDEND--especially a 100% dividend.
2. Roberts pretty much conceded the economics and scale and timing of emission reductions for c-taxes were strong.
3. Roberts almost always based his c-tax skepticism (or more accurately, c-tax hostility) on his POLITICAL assessment that they were not viable.
4. I stopped reading Roberts regularly around 2016, but the occasional articles I saw reflected some mellowing on CFD's political viability.
5. I spent almost 20 years of my career serving in politically appointed legal and policy positions. As much as I loved most of what Roberts wrote, he struck me as someone who lacked deep or nuanced political understanding.
6. Senator Whitehouse was quoted as saying there were 49 votes in the Senate for a CFD-type c-tax this fall. Win or lose in the months ahead, that head-count is good enough for me to say CFD was politically viable.
From about 2010-2012, Dave Roberts and Joe Romm were, by far, the best daily sources of climate information. Both Romm and Roberts were great on climate science, economics and technology. IMO, Romm was slightly better on climate media. But Romm was FAR superior to Roberts in his nuanced understanding of climate politics--which was not surprising since he served in a senior management position dealing with energy-technologies during the Clinton administration. (And, Romm liked CFD.)
I also liked Scott's 3-bullet-point response. Thanks.
In CCL we often talk about people appreciating their monthly dividend checks. Monthly will be small. Bigger issue is that many people would prefer electronic deposit, to avoid having to deal with another piece of mail and get it into an account.
Electronic deposit becomes a line on the bank statement, and it might be something obscure, like “External Deposit CFD TREAS”. I get a federal pension by direct deposit, and the line on my bank statement says “External Deposit OPM1 TREAS 310 / - XXCIV SERV”. Even a monthly check would need an enclosure to educate about what's going on.
So I'm not sure a monthly payment can be as salient as we say. Can you think of any label on the bank statement or check which would build support? “BONUS BIGGER THAN PRICE RISES FOR MOST PEOPLE”, or “CARBON FEE REBATE”?
Rather than deal with Roberts' take on Professor Mildenberger's work, you can see his presentation of his research directly: At a two-day Conference On Carbon Pricing last summer Professor Matto Mildenberger (Assistant Professor, Department of POLITICAL SCIENCE at UC-Santa Barbara) presented the basics of this paper. You can see his presentation and slides on YouTube. It’s about 25-30 minutes at 1x – very watchable.
From The Atlantic on carbon dividends (pessimistic). IMO, what is being pointed out is a failure of marketing. People are ignorant of the rebate because it's buried in a tax return or health insurance bill. They haven't been educated by a concerted campaign. Governments can learn from businesses how to advertise and sell a product. Why do people willingly purchase bottled water that's often no better than tap water and more expensive than gasoline? Marketing. Very challenging in this hyper-polarized world.
Not Even Free Money Can Solve the Carbon Tax’s Big Problem
Once more unto the breach, my friends—once more to talk about carbon pricing.
For 40 years, economists and environmentalists have proposed a simple solution to climate change: Put a price on it. If the government levies a fee on every ton of heat-trapping pollution that goes into the air, then the economy will move to cleaner, cheaper energy sources, and carbon pollution will fall over time.
In practice, this means raising the cost of fossil fuels—and doing that is easier said than done. Despite support from literally thousands of economists, carbon-price schemes have no near-term chance of passage in the United States, and they cover only about one-fifth of the world’s emissions overall. Researchers have come to understand that carbon pricing presents an unusually difficult political challenge, because it marries very salient costs (all fossil-fuel costs go up, for everyone) to somewhat opaque benefits. Worse, some economists argue that carbon prices fall hardest on the poor, because lower-income households spend more of their income on energy.
So in the past few years, advocates have proposed a twist meant to bypass those obstacles and make an uncomfortable idea more acceptable, even popular. Under this new scheme, known as a revenue-neutral carbon price, the government taxes every ton of carbon pollution but, instead of using that money, simply returns it to taxpayers as a payment. In theory, this helps voters see not only the costs (higher prices) but also the benefits (a big juicy check).
But abroad, some countries have actually gone and implemented the policy. And “there are a good number of hypothetical scenarios that show the idea has some promise,” Matto Mildenberger, a political-science professor at UC Santa Barbara, told me. This week, a team of researchers, including Mildenberger, published the first major study of whether a revenue-neutral carbon price actually increases support for climate policy. The results weren’t as good as the theory.
“We don’t find strong evidence that rebates are increasing people’s comfort with carbon pricing,” Mildenberger said. Even when people receive more in dividends than they pay out in the tax, they resent higher energy prices and tend to view the policy in light of their broader politics. “My basic view is that we’re not seeing evidence that dividends are a transformative way to overcome the politics of climate change.”
Mildenberger and his colleagues surveyed citizens of Canada and Switzerland, the two countries that have implemented something close to a revenue-neutral carbon price. In Canada, residents of some provinces receive a lump-sum carbon rebate as part of their annual tax return; all Swiss residents see the rebate as a discount on their health-insurance premiums.
Neither of these policies is the “ideal” tax-and-dividend scheme that some economists endorse, in which everyone receives a monthly or quarterly check. But they’re close, and they’re admirably progressive: In Canada, for instance, 80 percent of residents receive more in the rebate than they pay out in the tax.
Yet “in practice, [people] in Switzerland and Canada don’t know much about the rebates they’re receiving,“ Mildenberger told me.“They underestimated the benefit of the policy, and they overestimated the cost.”
In Ontario, for instance, nearly half of respondents didn’t know they had received a rebate. In Saskatchewan, most respondents did know but thought their rebate was, on average, $268 per year, when it was really $444. Support for the carbon tax was informed by party ID: Members of Prime Minister Justin Trudeau’s Liberal Party, which implemented the tax, supported it; members of the Conservative Party opposed it. When the researchers showed respondents their true rebate, nobody’s views changed, but right-wing respondents disliked the policy more. “They became more likely to believe they were getting ripped off by the policy,” he said.
In Switzerland, most respondents just didn’t know about the rebate. When told how much they had made from the policy, approval of the policy went up, but by a very small amount, the survey found. “There was nothing to support the more ambitious carbon taxes in the future that scientists say are necessary,” Mildenberger said. Last summer, Swiss voters narrowly rejected a larger tax-and-dividend scheme in a national referendum.
These tepid reactions to the policy are strictly irrational for most taxpayers, who are receiving what is, in effect, free money. Yet it makes a certain amount of sense: If you don’t support transforming society (and paying more at the pump) to address one of the major challenges of our time, why should $444 a year change that? “There’s a certain … weirdness to using dividends to solve the political challenges of carbon pricing,” Mildenberger said. “Because the actual benefit of carbon pricing is having a stable climate in 10 years. The payment is, like, a side benefit.”
For Mildenberger, the results suggested that subjective costs and benefits will always trump real economic facts. Because carbon prices affect every facet of the economy, and provoke lots of controversy, “there’s a fundamental asymmetry to the potential benefit you’re getting and the intense messaging you’re getting about costs,” he noted. In Ontario, for instance, the provincial Conservative government put stickers on every gas pump warning about the effect of the carbon price. A onetime yearly payment can’t beat such omnipresent messaging, he said. (Canada is planning to switch to quarterly checks soon, to raise the payments’ mind share.)
Gernot Wagner, an economist at NYU, was more sanguine about the results. “There are people out there who are convinced their policy design is the answer, and, look, it never is,” he told me. “At the end of the day, it’s all politics. And it’s all identity politics, which is not what we’d like to be the case, but it is.”
In his native Austria, he said, the government just implemented a carbon-tax-and-dividend scheme, along with a slew of business-friendly tax cuts and a national public-transit subsidy. “The whole package is what’s going to make the difference,” he said. More than 20 years passed between the first carbon-tax proposal in Austria, he noted, and the specific combination of policies and coalitions that made it possible.
For Mildenberger, though, the results show that it’s very hard to make policy create political feedback loops. In American history, only a few programs—such as Social Security, the GI Bill, and Medicare—have created political conditions that sustain and broaden them going forward. In general, “people are not mobilizing to defend their material interests,” he said.
In a political environment where election results themselves are contested, it’s folly to expect people to gravitate toward a reality-based understanding of costs and benefits, he said. “There’s much crazier things that people now believe than that the benefits or costs [of a policy] are $500 as opposed to $5,000. There may be real limits to how much we can expect the objective structure of policies to reshape politics in this moment.”
It’s a discouraging finding—and one that may point to a more hardball politics of climate change going forward. At least corporations can be counted on to mind their cash flow.
I personally have experienced pushback when describing the dividend portion of the bill. In fact if talking to conservatives, this piece of the bill is not be something I do not talk about readily since it has been a show stopper in conversations.
I endorse Brett's comments, but would add these as well--based mainly on the Nature study, not journalistic summaries.
I appreciate Mildenberger et al.’s careful and pioneering research on a vitally important policy alternative, a carbon fee coupled with a dividend. They convincingly demonstrate that dividends are not magic bullets that will win majority public support for a carbon fee. (We shouldn't put too much stock in recent U.S. polling on carbon fee and dividend before opposition lobbies have weighed in to savage the proposal.) Having watched the U.S. public shrug off the huge positive impact on household savings and employment from Democratic-led pandemic recovery spending in 2021, I (like David Roberts) realize more than ever that narratives matter more than facts, even when those facts pertain to one’s personal situation rather than abstract social policy. A recent New York Times editorial regarding public attitudes toward Biden’s economic record is highly instructive: “A lot of pain was averted, but it’s hard to feel gratitude for things that didn’t happen. The economic outlook is strong, but it’s hard to feel gratitude for things that haven’t happened yet. Right now, the pain of inflation is front and center for most.”
One important fact their study tangentially highlights is that trust in government matters. If people don’t believe government claims that the rebate makes them whole, we lose. Polling about carbon tax proposals in France, where people distrust in government runs strong, bears this out.
Another key point of the study is the importance of public knowledge of the dividend (salience). You can’t win public support if you bury financial distributions in annual tax returns (Canada’s approach until recently) or in discounts on government health programs (the Swiss model). Obama learned this lesson in 2009 when part of his recovery package included tax credits, which were too buried for most people to appreciate. We are right to hold out some hope that monthly dividend checks will address this problem.
Thus, I’m really not surprised that public support in Canada was lukewarm before monthly dividend checks began. There is also some contrary polling indicating stronger support for Canada’s national fee and dividend policy than indicated in this paper.
Nor, on entirely separate grounds, am I surprised that Swiss voters were reluctant to raise carbon taxes when theirs are already among the highest in the world. In a global commons, Switzerland would be foolish (or wildly altruistic) to extend its leadership until other countries start to catch up.
My last and perhaps most important response is that we shouldn’t be surprised that public ignorance runs deep over a relatively complex program of this kind. Their findings call for a sustained program of public education, not abdication. That will be true of any climate program that really works—since any such program, by definition, will create some serious social disruptions in order to transform two centuries of total dependence on fossil fuels virtually overnight.
I'm still a big fan of carbon fee and dividend on grounds of efficiency, effectiveness, and social and environmental justice. However, and I'm just considering this idea, we may find the happy medium between these considerations and political acceptability by combining a lower-than-optimal carbon fee and dividend with less efficient clean energy subsidies. The latter tend to be popular and could lower the retail cost of cleaner goods and services (with fiscal costs that are obscure to the public). RFF has modeled such scenarios. Meredith Fowlie also highlights this option in her latest blog for the UC Energy Institute.
Establishing venues to have honest open discussions on this topic is challenging, so congrats on having experiences on which to comment.
There are all sorts of valid framings for a dividend. One I don’t see mentioned a lot, but that I personally find useful on occasion is based in property ownership. Oil and gas producing areas, often of conservative bent, are keen on property rights (if of a specific kind and sometimes oddly limited use cases). There is an expectation for surface land and mineral rights owners to be paid for extraction (from the oil and gas reservoir) and use (affected land owners, waste injection well reservoir owners). A well affects everyone with interest in the reservoir, likely well beyond the land hosting the well head, so the money gets spread around to anyone with reservoir interest. The state also gets its severance tax. Everyone with an ownership stake gets some. This is one of the things that has made the US such a large energy producer – this alignment of objectives among those most immediately affected, while many mineral resources are nationalized elsewhere where those most directly affected don’t see a pay off and so can oppose projects vigorously. Land is most easily privatized, mineral rights and underground reservoir ownership is tougher, but commonly done.
Ownership should apply the waste reservoirs of air and ocean too. They are being used (air CO2 concentration up 40%+, ocean acidity up 30%+). Who owns air & ocean? Everybody, but the US government can speak only for its citizens, so we are talking about payments to all US citizens. The dividend is a tipping fee, a cost for the use of a waste reservoir, and we are simply seeing that owners get some fractional payment of what they are due.
I'd like the bank to send a text each month: “Your carbon dividend was just deposited.” Can that notification requirement (for bank customers who have authorized text messages) be added to the EICDA?
@Dana Nuccitelli Thank you for writing about this. A few random thoughts:
Last year Roberts pushed hard for CEPP and at the same time against carbon pricing, and seemed upset when CEPP was dropped from BBB.
The study seems to only have 1050 people (small sample?). Dividends for all were buried in tax credits. Half of them, the ones that said it doesn’t really make a difference, were told they were actually indeed getting a dividend - point is it was not readily visible to them.
I think when we get a price on carbon most people will not even know it. It will work slowly through our economy and people will naturally trend over to buying cheaper low-carbon alternatives. We will know the dividend makes it fair.
Is this one of those moments when we should not be too defensive of the policy but rather somehow be “yes and…” and on the offensive?
I agree that the marketing is the most important thing. Working with the public, I can see that messaging needs to be very simple for the majority of people to understand. Long, involved explanations don't work with the broad population. Yes, it would be best for carbon cash deposits to show up with simple, to the point language on bank statements, but I'm skeptical that the government and banks would be so transparent as to make these deposits easily intelligible. It probably does require politicians, pundits, and advocates coming out with an easy-to-remember talking point and repeating it over and over again for it to sink into people's heads. That's why I like the phrase “carbon cash back.” It's easy to remember and is mostly self explanatory. So yes, unfortunately, the public has to be sold on an idea in order for them to believe in it; facts are not so important.
Thank you all for your important and valuable insights! One additional helpful point of information and response that came out today is by Charles Komanoff, Director of the Carbon Tax Center:
Also our CCL blog post on this subject is ready to go and scheduled for publication tomorrow. Suffice it to say that the dividend is not the problem, but stay tuned for tomorrow 😁
Here's the Carbon Tax Center's take on Roberts' analysis and the original research by Mildenburger. Bottom line: He appropriately points out that suboptimally- designed policies don't work as intended if salient facts aren't clearly communicated, but it's also then possible to venture that better policy design is possible. We're obviously ahead of the politics, which is exactly why CCL must keep pushing its favored policy. The public needs to know they're getting money back, and for many the amount will defray their increased costs and then some. Since nobody keeps a running balance of their carbon costs, public acceptance will be based on the subjective, subject to suasion from both sides. It's incumbent that proponents be prepared to sell it – hard – as there will be plenty of opposition. There's hope: the public can be sold bottled water and wars when there's a will to do so. They can be sold a carbon tax with a nice, frequent check, and maybe notice early results in the air. (Emphasis added below – PJ
Someone chose an inopportune time to beat up on carbon taxing’s fee-and-dividend variant. Not U-C Santa Barbara political scientist Mitto Mildenberger, whose paper, Limited impacts of carbon tax rebate programmes on public support for carbon pricing, co-authored with scholars from Montreal, Vancouver and Bern (Switzerland), appeared this week in the prestigious journal, Nature Climate Change. No, I mean iconoclast blogger David Roberts, who used Mildenberger’s provocative paper as a launching pad to again dunk on carbon pricing and people who still hold out hope for it.
Economists have long insisted that pricing carbon is the most efficient way to reduce greenhouse gases. For years, they hijacked the climate discourse, with untold money and effort put behind proposals for various increasingly baroque pricing schemes, to very little effect. (emphasis added)
Roberts may be right about efficiency and economists, but his description doesn’t fit climate hawks like Citizens Climate Lobby and Carbon Tax Center. We place our chips on carbon taxes not on account of their economic efficiency but because of their unrivaled potential to slash carbon emissions quickly in the U.S. — and also their global portability.
The meat of Mildenberger’s paper and Roberts’ post, distilled in their respective titles, is that in the only two countries with some form of fee-and-dividend carbon pricing, not just public support but basic awareness of the programs, particularly the dividends themselves, is middling at best.
We think this “finding” is both questionable and beside the point. Let’s take a close look at each of those countries: Switzerland and Canada.
Switzerland
Official Swiss notice of this year’s carbon dividend. At the current 1.09 exchange rate, 88.20 CHF = $96.14.
Switzerland’s carbon tax began in 2008 and reached its current level of 96 Swiss francs per metric ton in 2018. Converting metrics and currencies, that equates to $95 per ton of CO2, the kind of level that carbon taxers dream about. According to CTC’s carbon tax model, if the U.S. next year started a $15/ton carbon tax and ramped it up to reach $95 in 2030, emissions in that year would be 33% less than in 2005, taking us 2/3 of the way to the Biden target of halving 2005 emissions in 2030.
Not only that, a U.S. carbon tax at the Swiss level of $95 a ton would generate a carbon dividend in 2030 of $1,500 per person, even allowing for reduced emissions and a larger population and equal shares for children. Surely, a $1,500 carbon check — or, if you prefer (and we do) 12 monthly carbon dividends of $125 per person — would translate into strong and rising popularity, especially considering that a majority of people and households would be expending less than those amounts in increased direct and indirect energy costs.
That’s the straw man. The reality is that Switzerland’s $95/ton (U.S.) carbon tax will deliver only $96 in per-person dividends for the entire year. (See document at left, downloadable here.) That’s less than one month’s worth of what U.S. residents would receive under a full fee-and-dividend scheme for a Swiss-level $95 carbon tax. In that light, it should be no surprise that Mildenberger and his co-authors didn’t find residents of Geneva or Zurich dancing in the streets over their carbon dividends. In U.S. terms, Swiss residents’ 2022 carbon tax dividend is what Americans would get in 2030 from a piddling carbon tax of $5.50 per ton of CO2.
Why the discrepancy? Why is Switzerland’s carbon dividend only 1/15 as great as what a U.S. dividend would be from a carbon fee of the same level?
Excerpt from Switzerland Federal Office for the Environment document, “The Swiss Approach to Carbon Pricing,” May 2021.
There are four big reasons. First, Switzerland’s energy consumption is far less per capita than that of the United States. Second, hydro-electricity rather than carbon-based fuels like coal and methane powers the country’s grid. Third, the Swiss carbon tax exempts transport and agriculture and more than half of Swiss industry (see graphic at right; full document here). Fourth, part of the tax revenue is siphoned off by businesses before the dividends get calculated.
No wonder, then, that Switzerland’s carbon dividend is so meager. Consider further that, as Mildenberger et al. point out, “Citizens receive their rebates as a discount on their health insurance premiums, with annual notifications about this monthly benefit through health insurance forms.”
Annual notifications through health insurance forms. This is reasonable, even enlightened, public policy. It’s also almost diabolically designed to obfuscate the dividend side of the carbon fee coin.
Canada
Canada’s carbon tax is far more complicated than Switzerland’s. When we last updated CTC’s Canada page, in March 2011, we characterized carbon pricing in the country’s 13 provinces as follows:
Six provinces, including Ontario and Alberta, were covered by the federal pricing scheme that would reach $50/tonne in 2023 — around $36/ton in U.S. terms — and then ramp up sharply to $170/tonne by 2030.
Four were deploying their own carbon tax, led by British Columbia, which inaugurated the Western Hemisphere’s first meaningful carbon tax in 2008.
Quebec and Nova Scotia were part of a two-country carbon cap-and-trade program that is anchored by California.
New Brunswick employed an output-based carbon pricing system.
Wording courtesy of UCSB Prof. Matto Mildenberger, lead author of the Nature Climate Journal article discussed here.
Given this patch-quilt, as well as the novelty of carbon pricing in most of Canada, it seems to us unsurprising that polling that commenced in February 2019 (and extended through May 2020, with five “waves” in all) would yield the mixed results reported in the Midenberger paper: upticks in two provinces, Ontario and British Columbia, and downturns in the other three, Quebec, Alberta and Saskatchewan.
The “core question” asked in the Canada polling, as described by lead author Mildenberger, who graciously shared it with us yesterday via email, is shown at left. The language is neutral, perhaps to a fault. It offered no affirmative spin, such as “Canada recently began taxing fossil fuels in order to protect the climate, with the money rebated in ways that will help households get ahead financially.” That kind of favorable tilt could perhaps be justified as necessary to counter the negative vibe surrounding taxation generally.
To be sure, that negative vibe is precisely what drives pundits like Roberts to deride carbon taxing, as he did in the second and third paragraphs of his post:
Over time, political experience with carbon taxes has highlighted a truth that should have been obvious long ago: carbon taxes are taxes, and people don’t like taxes. People don’t like paying more money for stuff.
More broadly, carbon taxes are an almost perfectly terrible policy from the perspective of political economy. They make costs visible to everyone, while the benefits are diffuse and indirect. They create many enemies, but have almost no support outside the climate movement itself. All the political intensity is with opponents.
We get it. We know full well the albatross that taxation always bears. But we also know that taxes on “bads” have been enacted into law. The U.S. government taxes cigarettes, as does every state. New York City taxes grocery bags, and Philadelphia and Berkeley, CA tax sugary soft drinks.
Obviously, taxing something as supercharged financially and culturally as fossil fuels is a much heavier lift, as evidenced by the absence of explicit carbon taxing anywhere in the fifty states. (We exclude federal and state motor fuel taxes, due to their tie-in to roads rather than health or climate; we also exclude New York State’s Petroleum Business Tax, though its support of NYC metro-area transit perhaps merits an honorable mention; conversely, New York City’s congestion pricing program, now scheduled to begin in 2023, will create a strong template for carbon taxing, as we’ve pointed out many times, including in The Nation magazine in 2019.)
So yes, carbon taxing — not fig-leaf $20/ton-and-no-higher carbon taxing a la Exxon or the occasional Republican, but a levy rising steadily to triple digits before 2030 — is hard stuff. But so is just about every other decarbonization policy or program, especially if done at scale.
Well-heeled NIMBY’s whittle down Wind projects. Rooftop solar endures pushback not just from utilities and their high-wage unions but also from concerns that lower-income residents could gett stuck with higher utility bills. Only splinters of President Biden’s Build Back Better plan, which wasn’t going to be able to deliver its promised 50% cut in emission by 2030 anyway, will pass, thanks to one or two Democratic senators and 50 Republicans. Even the push to electrify everything may find its vaunted carbon benefits a good deal less potent than advocates imagine, an issue we intend to explore in a future post.
A record one-third of Americans in the latest “Global Warming’s Six Americas” are “alarmed” by climate change.
Still, though, the biggest misdirection in the Mildenberger et al. paper and the Roberts post may be their fretting over public opinion in the first place. The public doesn’t have to love carbon fee-and-dividend. It simply needs to embolden political leadership that will enact it (and the raft of complementary policies) into law and ensure that the fee, which shouldn’t be set too high to start, can keep rising over time.
Public opinion increasingly supports climate action, not tepidly but “with alarm,” as the latest Yale – George Mason opinion survey of “Global Warming’s Six Americas” attests (see graphic at right, and more detailed treatment with link here). It’s past time for carbon pricing naysayers to throw off their ideological blinders and get behind policies that can pass and deliver.
PS to David Roberts: Contrary to your Volts post, fee-and-dividend did not “los[e] badly in a public referendum in 2016.” What went down to defeat in Washington state was a sales tax swap of the carbon revenues, necessitated by the state’s constitutional prohibition against dividend-type state tax treatments. And what doomed the proposal was opposition from climate hawks who took umbrage at being leapfrogged politically, and in revenge brought in lefty heavy hitters to slime the measure. But that’s another story.
The Roberts article ignores the obvious: carbon fee and dividend overcame political obstacles and became national policy in Canada and Switzerland. It can do the same here in the United States with strong grassroots support. Let us never forget that lesson.
So glad you brought up the study's finding that people's opinions on the carbon tax and dividend follow their tribe's, and that is why CCL highlights the Republicans that are on board and is focused on getting more conservative support!
Dave Roberts (Dr. Vox) and others erroneously cite this study to question the political value of offering cash dividends from a carbon tax.
Here's the stunningly simple and decisive rebuttal:
The study cites opinion survey results from Canada and Switzerland. Neither country uses the greenhouse gas pollution fee to pay the kind of regular cash dividend proposed in the bill CCL supports (HR 2307).
Canada pays its rebates through an income tax credit. Switzerland funds a discount on health insurance premiums.
Compared to a cash payment, these are obscure, easily-overlooked ways to deliver a benefit from a carbon tax.
So, the BOTTOM LINE from the study is this:
Want to make sure people understand the benefit they're getting from a carbon tax?
Send them cash in their bank account or a check in their mailbox EVERY MONTH! Don't rely on income tax rebates or health insurance discounts!
Thanks all for the essential ongoing discussion. Wanted to flag that today there is a new Volts cast where he interviews Gerald Butts and Catherine McKenna on Canada's carbon tax:
Volts podcast: Gerald Butts and Catherine McKenna on Canada's carbon tax
A big & overlooked story.
In 2015, after nearly a decade of conservative rule, Justin Trudeau and his Liberal Party won a majority of seats in the Canadian parliament and control of the federal government. Part of Trudeau’s election platform was a carbon tax.
The proposed tax had a few key features. First, it would only be imposed on provinces that did not have their own pricing system that met a few minimum requirements. And second, all the money collected from a province would be returned to that province as carbon dividends.
After years of vigorous advocacy and negotiations, Trudeau’s liberals got the tax passed through parliament. It was implemented in early 2019, just before another federal election that became widely seen as a national referendum on the tax.
Liberals won again. The carbon tax was affirmed. It’s going to stick — and rise to a whopping $170 a ton by 2030.
This is a startling success story for climate policy that was largely overlooked in the US. We, uh, had some other stuff going on. But it’s worth taking a closer look at how Canada pulled it off.
Gerald Butts & Catherine McKenna
Two people at the core of the tax pitch were Gerald Butts, who was principal secretary to the prime minister from 2015 to 2019 and Trudeau’s closest personal advisor, and Catherine McKenna, who was the minister of environment and climate change during the same period.
Butts and McKenna were in the trenches and they have the scars to show for it. Both of them noticed the piece I published on Volts in January on carbon tax refunds — and they objected to the conclusion that dividends did not make the carbon tax more popular in Canada.
So I had them on the pod! We talked about how the carbon tax was conceived, what enabled it to secure majority support (yes, they say, refunds were important), and where the politics of carbon pricing stand as we move into the 2020s. Not only were my spirits lifted — it’s nice to know there’s a sane country out there somewhere — I learned an enormous amount. I think you will too.
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