Carbon Dividend...Why not pay down our National Debt (vs share dividends with only a few)?

@Kevin McClair CCL's longstanding policy, enshrined in the Energy Innovation and Carbon Dividend Act, would return carbon fee revenues to all Americans. See the training here.

However, CCL favors an explicit dividend (or “carbon cashback”) rather than using the revenue to lower the national debt. The latter approach renders it invisible to most people and thus would make the fee (or tax) less popular. Nothing would stop Congress from cranking up spending, or cutting other taxes, to push the national debt back up. Much better to have a program that creates a clear nexus between climate mitigation and a socially just means to help households pay for the inevitable cost of transition. I discuss some of the social science research on dividends and public attitudes toward carbon pricing here and in the referenced research guide, and in various Nerd Corner posts such as this one.

Thanks @Kevin McClair, building off of Jonathan's excellent comment, this particular training covers a lot of the dividend questions/trade-offs you mention to help out:

How The Dividend Gets Distributed
 

@Kevin McClair Welcome to CCL! I remember having lots and lots of questions about Carbon Fee and Dividend when I first joined. Keep asking questions. I can see you are taking time to learn and think it through - good work! So glad to have a new thoughtful CCLer!
 

• Why do you feel using the Dividend to pay down the national debt would dilute broad-based citizen interest in a Carbon Fee/Tax? 
  • The social science research appears to suggest that D/R/I's most prefer that the Dividend be reinvested into renewable energy initiatives vs use for tax rebates or deficit reduction.  [Note: I am distinguishing between national debt and annual budget deficit.]
  • 66% of one research study supported using a Dividend to pay down the Debt.
  • Fewer...45-60%...supported using the Dividend to assist low income communities prepare for and adapt to climate change...what CCL seems to refer to as a 'just' use of the Dividend.
• Applying the Dividend to our Debt keeps the money out of the annual budget (deficit) discussion.  Other than...by reducing the Debt the increasing amount of interest needing to be paid by our government annually will be lower than otherwise, which will take some pressure off our legislators as they strive to fully fund our military, medicare and social security each year.
• Why do you think 28 Nobel Laureates and 4 former Fed Reserve Chairs support direct payment of the Dividend to citizens in the form of rabates?  Have they not read the social research, re folks desiring it to be applied to Debt reduction?  Or do they have other reasons/logic for their position?
• A House bill with approx 95%+ D's as sponsors/cosponsors and only <5% R's involved doesn't sound that bipartisan to me!  That said, the EIA bill has been around for a number of years at this point.  If it is so good, having so much broad-based citizen and bipartisan support, why is it not already a passed law?  

Hi @Kevin McClair. When answering hypothetical polling questions, I think it's easy to say ‘oh sure, we should use this money to deploy more green energy, or reduce the debt, or feed the hungry,' or whatever the hypothetical might be. In practice, were we to pass a carbon price, that would cause energy prices to rise, and thus peoples' electricity and gasoline bills. That would disproportionately impact low-income households, who spend the largest proportion of their income on energy bills.

So for one thing, the dividend is good policy because it turns this disproportionate burden on low-income households into a net income for those same people, thus reducing poverty and income inequality. And I think it's good politics too, because people love receiving rebate checks, and that should especially be true when energy prices are rising. I think in practice, a carbon price would be much more popular if it were coupled with regular carbon cashback checks than if people were simply told that the money was going to reduce the national debt, regardless of how people respond to hypothetical polling questions.

As for why the EICDA hasn't passed, unfortunately public support doesn't determine what laws Congress enacts, or long ago we'd have had a carbon price and gun safety laws and many other policies that have broad public support but are stymied by a political system over which certain highly profitable and influential industries and individuals have an outsized influence. But we'll continue working to build the political will for carbon pricing and other critical climate policies.

Hi @Kevin McClair, those are good questions. There's no one right answer as to how to use the revenue from carbon fees. The issue isn't as straightforward as saying that pricing carbon is the most efficient way to address most carbon emissions (which, by the way, isn't to say that other approaches don't have an important role to play). Values and political judgments play a much bigger role in how to think about revenue uses. There's certainly a case for using revenues to lower the deficit, though in recent years macroeconomists have become more sanguine about the negative impacts of deficit spending.

You are right that many people tell pollsters they support earmarking carbon revenues for deficit (or debt) reduction. So do some fiscally conservative groups like the Committee for a Responsible Federal Budget. For the reasons that Dana and I both mentioned, however, I don't believe that expressed sentiment would hold up in the real world once households begin to experience a rise in energy prices.

The political importance of programs to relieve household costs in a highly visible ("salient") way is reflected in a number of research studies, but also in Canada's decision last year to shift from offering tax breaks (with low visibility) to offering highly visible Climate Action Incentive Payments. I discuss that issue in a previous Nerd Corner post. For more recent research findings on how education about dividends can greatly boost support for carbon pricing, see this post. 

Economists overwhelmingly support dividends for several reasons. Conservative supporters (like the late Republican statesman George Shultz) believe that sending revenues to the Treasury in the name of deficit reduction will just result in growing the size of government, as pressure to cut spending is relieved. Liberal economists greatly appreciate the fact that lump sum dividends disproportionately help lower-income households afford higher energy costs through the transition period. Simply reducing the deficit would offer no such relief.

As to why carbon pricing hasn't passed, that's a long discussion. As Dana mentions, the oil and gas industry and their political supporters, as well as some conservatives who distrust any government program to tackle climate change, succeeded in blocking any major climate mitigation policy until last year. Carbon pricing came within one vote of getting included in that policy, so it's still highly viable. I discuss some of the politics around carbon pricing in my 2021 paper, The Case Against (Some) Carbon Tax Critics. 

@Kevin McClair P.S. If we do get a national carbon pricing bill passed, don't be surprised if it contains a mix of revenue uses, reflecting the need for political compromise. We could well end up with some money earmarked for lower-income households, some for hard-hit coal miners, some for green energy programs, and some for deficit reduction. I, for one, wouldn't complain.

@Jonathan Marshall Don’t you mean “WHEN we do … I WON’T complain” 😊
 

@Brett Cease  Hi Brett…thanks for suggesting the Dividend distribution training.

At present I haven’t been able to personally verify, roughly, the $ flows from a tax/fee, but have no reason to doubt their accuracy so will assume they are correct/reasonable.

I’m much more comfortable saving the $billions of new federal government admin needed and keeping government as small as possible by having one (1) dividend payout check cut and sent to Treasury to apply to the national debt.  The infrastructure and process steps, with inherent quality control (accuracy risk) for processing ~100million individual dividend payments sounds to me to be a process nightmare!  Keep it simple, pay down the debt (which will translate into abundant individual citizen and gov annual budget financial benefit).  Watch the upcoming budget battle our federal legislators are about to engage in over the next few months…it’s going to be ugly, and a Carbon Dividend applied to the debt (NOT to the deficit) will help the situation, eg lower-than-otherwise interest expense in the annual federal budget (which crowds out needs like Medicare, Military, Social Security) AND enables lower rates on home loans, auto and credit cards, personal loans, etc.
 

@Robin Paone  A belated “thanks“ for the warm welcome, Robin!  
 

@Dana Nuccitelli   Hi Dana…If this projection of sea level rise is anywhere close to future reality, we’re going to lose Miami, Naples and many other places in South Florida.  

And guess what?  Florida Sens. Rubio and Scott both voted against the recent national debt ceiling rise bill.  

My point?  People might like to receive rebate checks, but as you point out our legislators need to solve big problems…without adding additional billions on the annual federal budget expense line to cover new/additional admin expense to handle a carbon dividend.  

My opinion, respectfully.

Any idea how Florida’s Senators, and Representatives for that matter, feel about a Carbon Fee/Tax & Dividend in general?
 

@Jonathan Marshall Jonathan…I agree and will not be surprised if, thru legislative compromise, a portion of the revenue raised from a carbon fee/tax is applied against reducing the federal debt.  

For fiscally conservative legislators located in, as one example, sea level rise at-risk districts/states this might be a win-win for all involved.
 

Hi @Kevin McClair. It's not the revenue distribution that Republican members of Congress take issue with; they don't support a price on carbon pollution. Also our bill wouldn't add to the deficit. The relatively minimal costs of distributing the dividends via existing infrastructure (the IRS already distributes tax refund checks annually) could be paid for with something on the order of 1% of the carbon fee revenue.

@Dana Nuccitelli

Hi @Jonathan Marshall …you mention that a carbon fee/tax “came within one vote” of being included in recent legislation…was that in the overall House, a committee of the Senate?  

I’m trying to better understand which D/R/I legislators supported it vs not, and exactly what they were voting on (eg revenue payment to 100million+ people, to national debt, etc).

Thanks in advance.
 

@Kevin McClair All Democrats but Manchin were apparently willing to support a modest carbon tax. White House-Backed Carbon Tax in Sight for Biden’s Climate Bill - Bloomberg
 

@Jonathan Marshall  Thanks again, Jonathan.  To get more bipartisan support for a carbon fee/tax it sounds like it might require more/full usage of the revenue gained being applied toward reducing the national debt, a R priority.

This…

• keeps the money out of the annual budget/deficit discussion which will  be its own ongoing, spirited discussion between D’s and R’s.
• provides tangible financial benefit to all, including those with loans whether homeowner with mortgage, tenant paying rent to landlord with mortgage expense, small business owner with loan, personal credit card, auto loan, etc.
   

Hi @Dana Nuccitelli …have been thinking more about how to stimulate R/D/I bipartisan House and Senate legislator support for a carbon fee/tax via the revenue dividend and saw this.  A carbon fee/tax can help with clean energy transition, our economy and ensuring national security:

@Kevin McClair I am a CCL volunteer of long standing.  Even here in the north (MN) we are experiencing drought, higher heat, pollution-caused illnesses, and more violent storms.  If you are concerned about the national debt and losing lots of important cities in FL, we share your concern. We believe that big action at the national level is essential.   Every year we spend billions (nationally) coping with climate-fueled disasters, water shortages, illnesses and deaths, which fuel rising medical expenditures. You read about this everyday in the news, I'm sure.  Enacting a rising carbon fee is the big national solution that jump starts the entire transition process.  A carbon tax paid by fossil fuel at its source reverberates through the economy and signals every sector that a transiiton is starting.  Even without subsidies, it incentivizes investments in, and  the transition to clean renewable energy.  Households are the backbone of the economy. When households are protected at least somewhat from  rising prices by cash payments, it gives the policy staying power enabling it to work long enough.  And consumers, who  can continue to purchase, add stability to the economy.  If your Senators are not supporting this, and have not supported any other climate action, as a Floridian, you could communicate with them through  CCL Take Action /Write Congress to let them know that inaction is not acceptable.  Good luck and well-done you for being curious and learning more about climate colutions.  
 

Hi @Laura Haule …I appreciate your thoughts!

As far as Florida Senators‘ thoughts on climate change, I was very pleased to discover today Sen Rubio’s (plus a number of other Sens) involvement in this bipartisan initiative:

I encourage them, and their other Senate Colleagues, to:

• follow the science/facts, which seem to have evolved significantly over the years, re the role of human activity;
• attack this challenge via addressing the root cause (see 

• …if our using carbon-based energy is the underlying cause, we need to move aggressively to stop using carbon-based energy (as opposed to capturing/storing it, which as a layperson sounds to me to be trying to bury the problem rather than address it directly);
• use this unique opportunity to ‘kill two birds with one stone’…save Miami, Naples, and many other US cities by implementing a carbon fee/tax AND devote the revenue raised to reducing our national debt, which will have material benefits for our citizens and economy.
   

@Kevin McClair that is encouraging, and you are right in saying that carbon sequestration is a good thing, and many other steps are needed.
 

@Laura Haule Laura…I’m not saying carbon sequestration is a good thing…to clarify, it doesn’t address the root cause of the problem.  But, if the current situation we are in leaves us no option but to include it in the mix of tactics we need to employ, even if only temporarily, we have no (better) choice at the moment.  Otherwise, we lose a big part of Florida, Delaware, etc.
 

@Kevin McClair I understand what you are saying, and agree that we need big steps, which has been politically very difficult. Carbon sequestration is not going to save south FL, but sometimes, for example in agriculture, where people are sometimes hesitant to change their practices for fear of crop failure or losses, an effort to  try something like a cover crop and carbon sequestration is a first step to being open to further more important steps and understanding more realistically what we need to do.  

 

Thanks @Laura Haule , for sensitizing me to the topic of carbon sequestration.  Upon googling the term, I discovered that CS means much more than CC&S (Carbon Capture & Sequestration).

Can you/anyone reading this thread point me to a source…CCL or otherwise…that succinctly lays out on one summary page what the various steps/actions are that need to be taken in order to get us to 1.5C by a certain date; how much each step contributes to attainment of that goal; what the probability of success is for achieving that step (eg is the technology proven vs needs development); and what the incremental out of pocket cost is for each step and who will bear (pay) that cost?  
Perhaps IPCC?

There seems to be a myriad of well-intentioned activity swirling around out there, and I am hoping that there is someone taking a look at the big picture to ensure there is “orchestrated chaos” driving us to 1.5C.

Separately, I recall decades ago a lot of public discussion about safely burying nuclear waste underground, my sense today is that contributed (along with other operating concerns) to the civilian nuclear energy sector in the US not taking off like some once thought.  From a safety standpoint I have (similar) concerns, today, about attempting to bury liquid and/or gaseous carbon given geologic uncertainties…unless…Minnesota will volunteer and technically guarantee that it will accept all gaseous/liquid carbon the US can generate and safely/permanently store it underground within its state borders? (sarcasm intended)
 

@Jonathan Marshall 

Reduce carbon usage now!

Interesting info re how the French have been able to get  70%+ of their electrical need from ‘non-carbon-emitting’ nuclear, and have done so with advances in handling nuclear waste ie recycling and tiering of disposal streams…

…unfortunately, I’ll guess it would take 5-15 years to safely get a lot more nuclear capacity up and running in the US.  Then again, given US experience along with France and perhaps others, it’s proven technology with manageable known risk as opposed to costly non-root-cause CC&S with currently unknown technical viability.
 

Hi @Kevin McClair. Given that the planning for the new units at the Vogtle nuclear power plant began in 2006–2008, construction began in 2013, is just being completed now, and there are no other new US nuclear power plants currently in the planning stages, I'd say 5–15 years for a significant amount of new nuclear power is pretty optimistic. 

But for more information on these topics, I'd recommend our training: How to Create a Clean and Stable Electric Grid.

Hi @Kevin McClair, I suggest you may want to start new threads to discuss nuclear issues or carbon sequestration, or search Nerd Corner (and the Nuclear Action Team forum) for relevant existing discussion threads. I've posted quite a few comments on both sites about nuclear issues. 
 

Thanks @Dana Nuccitelli .  I hear you re 5-15 years being optimistic.  

The good news:

• basically from scratch, we landed and safely returned astronauts from the moon’s surface in less than 10 years.
• with nuclear technology, today, we’re (US, France, etc) not starting from scratch.
• with nuclear, success is a sure technological bet.  CC&S is not.  If growth of clean energy is important, we could do this in five (5) years.
• Would be a shame if we spent tons of money, adding further to our dangerously growing national debt, on a new technology and it doesn’t give us the benefit we need…while we have nuclear already on the shelf.
   

@Jonathan Marshall

Thanks Jonathan. 👍