Comparing the Carbon Dividends Plan

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The Carbon Dividends Plan (see summary below) is a policy proposal announced on February 8, 2017, by eight distinguished conservative authors from the Climate Leadership Council. CCL is very excited that the conservative luminaries who wrote the Conservative Case for Carbon Dividends have entered the national discussion on how to address global warming. Only two individuals in the 20th century have served as both Secretary of State and Secretary of the Treasury, and they are both authors on this paper. Their voices are needed.

Their thoughtful and well-researched plan factors in both political considerations and the physics of the climate to arrive at a market-based, simple and business-friendly plan that clearly benefits the majority of Americans. Like CCL, this leads them to support returning 100% of the revenues raised from a carbon fee to households. However, there are some differences between our plans (see FAQs below).

It's important to note that this is not the same as the Energy Innovation and Carbon Dividend Act. On this page, you'll find out how their proposal differs from the Act so that you're prepared to discuss the differences.
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Comparing the Carbon Dividend Plan is part of the Policy Studies & Tools series.
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What Are The Conservative Carbon Dividends Plan Pillars?

Carbon Tax
"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." The "carbon tax should begin at $40 a ton and increase steadily over time."

Carbon Dividends
Carbon dividends for all Americans returned monthly via dividend checks, direct deposits, or contributions to their IRAs. The Social Security Administration would administer this program.

Border Adjustments
Border carbon adjustments based on the embedded carbon content of both imports and exports. Proceeds from such fees would be included in the carbon dividend checks.

Regulatory Simplification
“Elimination of regulations that are no longer necessary upon the enactment of a rising carbon fee 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 fees would also make possible protecting companies from federal and state tort liability for historic emissions. To build and sustain a bipartisan consensus for a regulatory simplification of this magnitude, however, the initial carbon fee rate should be set to significantly exceed the emissions reductions of all Obama-era climate regulations, and the carbon fee should increase from year to year.”

Table Comparing Key Elements of Both Policies

 

Energy Innovation Act

Climate Leadership Council

Initial price per ton CO2e:

$15.00

$40.00

Annual increase per ton:

$10.00

Steadily increasing

Use of revenue:

Return to households

Return to households

GHG’s covered

Many, including methane

Only CO2

Border adjustments

Yes

Yes

Impact on existing regulation

See Energy Innovation Q&A (# 2.3) for details

Rollback of CPP

Tort liability immunity

None

TBD

Both proposals embody conservative principles of free markets and limited government. Both offer an equitable, popular and politically viable way forward, paving the way for a much needed bipartisan climate breakthrough.

Who Wrote The Conservative Carbon Dividends Plan?

There are eight authors, including three former Secretaries of the Treasury, two former Chairs of the President's Council of Economic Advisors, and two former Secretaries of State. Only two individuals in the 20th century have served as both Secretary of State and Secretary of the Treasury, and they are both authors on this paper (Baker and Shultz). More information on each of the authors is below:

  • James Baker, III, served as Secretary of State under President George H.W. Bush, Secretary of the Treasury under President Reagan and White House chief of staff under both. He is a senior partner in the law firm of Baker Botts.
  • Martin Feldstein served as Chairman of the President’s Council of Economic Advisers from 1982 to 1984 under President Reagan. He is the George F. Baker Professor of Economics at Harvard University and President Emeritus of the NBER.
  • Ted Halstead is the founder, President and CEO of the Climate Leadership Council. Previously, he founded New America, a leading public policy think tank. He is co-author of The Radical Center: The Future Of American Politics.
  • Henry Paulson, Jr., served as Secretary of the Treasury under President George W. Bush. Previously, he served as chairman and chief executive officer at Goldman Sachs. He is the founder and chairman of the Paulson Institute.
  • George P. Shultz served as Secretary of State under President Ronald Reagan and as Secretary of Treasury and Labor under President Nixon. He is the Thomas W. and Susan B. Ford Distinguished Fellow at the Hoover Institution.
  • Thomas Stephenson is a partner at Sequoia Capital, a venture capital firm based in Silicon Valley. Stephenson previously served as the United States Ambassador to Portugal from 2007 to 2009 under President George W. Bush.
  • Gregory Mankiw served as Chairman of the President’s Council of Economic Advisers from 2003 to 2005 under President George W. Bush. He is the Robert M. Beren Professor of Economics at Harvard University.
  • Rob Walton served as chairman of the board of Walmart, the world’s largest retailer and employer, from 1992 to 2015. He is currently Chairman of the Executive Committee of Conservation International.
Why did they write this?

The authors repeatedly cite in their writing and in their public statements that the mounting evidence of climate change is growing too strong to ignore. They advocate following the path blazed by President Ronald Reagan as he responded to the depletion of the ozone layer. Given the risks, President Reagan listened to the scientists and advocated for an insurance policy. This is just such an insurance policy for the risks scientists warn us about on global warming, and the authors wrote this solution to ensure that our insurance policy embodies long-standing conservative principles.

What is their starting price?

Their carbon tax would start at $40.

What is their rate of increase?

The Climate Leadership Plan currently does not specify a rate of increase. The CLC plan does call for a "gradually rising tax on carbon dioxide emissions," that would "increase steadily over time".

Does their plan cover additional greenhouse gas emissions?

Their plan would cover only CO2.

Where is it assessed?

The fee for their plan would be assessed upstream at the refinery or the first point where fossil fuels enter the economy, meaning the mine, well or port.

Where will the dividend go?

100% of the revenues from both the border adjustment and the fee would be rebated to Americans on an equal and quarterly basis. It is estimated that a family of four would receive approximately $2,000 in carbon dividend payments in the first year.

Which regulations would be repealed?

The Climate Leadership Council's plan suggests that all regulations that are no longer necessary upon the enactment of a rising carbon tax should be repealed. The only regulation specifically mentioned is the Clean Power Plan.

Is their dividend taxable?

No, the dividend is not taxable. Since it would not be taxable, it is not clear how the policy would be scored as revenue-neutral, since the CBO 25% haircut would apply (see our laser talk “25% and Pay as You Go” for details).

How would this affect the U.S. commitment to the Paris Agreement?

Combining results from three studies (Chen and Hafstead, RFF 2016; Hafstead and Kopp, RFF 2016; Treasury Department Office of Tax Analysis, 2017), a companion report titled “A Winning Trade” estimates that a $40/ton tax applied only to CO2 emissions would be likely to deliver a 28% reduction in emissions. This is the upper end of the U.S. Paris Commitment.

What is different compared to the Energy Innovation Act?

There are several differences between the Conservative Case for Carbon Dividends and the Energy Innovation Act legislation. The Energy Innovation Act applies to all greenhouse gasses from fossil fuels and GHGs not found in nature (e.g. HFCs), whereas their proposal would only cover CO2. The Energy Innovation Act begins lower ($15) and increases faster ($10 per ton per year). The Energy Innovation Act does not include any excess revenues from the border adjustment into the dividends. We believe that would help keep the policy in line with the WTO. The Energy Innovation Act's dividend would be taxable to avoid the 25% offset and would be revenue-neutral. The Energy Innovation Act would return a half-share of the dividend to each child.

How can I find out more information about the Climate Leadership Council?

There are four resources available on this proposal on the Climate Leadership Council website: https://www.clcouncil.org/

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