The Climate Leadership Council's Carbon Dividends Plan

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The Climate Leadership Council's (CLC) Carbon Dividends Plan is a carbon pricing proposal advocated for by many prominent conservative thought-leaders. It's important to note that this is not the same as the Energy Innovation and Carbon Dividend Act. This training page explores how their proposal differs from the Energy Innovation Act and highlights useful resources available from the Climate Leadership Council.

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What is the Climate Leadership Council?

According to their website, “The Climate Leadership Council is an international policy institute founded in collaboration with a who’s who of business, opinion and environmental leaders to promote a carbon dividends framework as the most cost-effective, equitable and politically-viable climate solution.”

The Council's strategic approach primarily focuses on gaining Republican support by obtaining endorsements from prominent leaders and major companies (AT&T, BP, ConocoPhillips, ExxonMobil, Ford, GM, Johnson & Johnson, Microsoft, PepsiCo, and Unilever are all founding members). On the other hand, Citizens' Climate Lobby’s  strategic approach focuses on demonstrating bipartisan support from constituents and state/district leadership for carbon fee and dividend. Also, Citizens’ Climate Lobby does not accept donations from the oil and gas industry.

In 2017, the Climate Leadership Council released “The Conservative Case for  Carbon Dividends,” a report by eight distinguished conservative authors, including George Shultz and James Baker. It is sometimes called the Baker-Shultz Plan. The plan is similar to CCL’s carbon fee and dividend approach in many respects but differs in some significant details, and the two plans and organizations are sometimes confused with one another. CCL welcomes and appreciates the Climate Leadership Council, and the conservative leaders who wrote the Conservative Case for Carbon Dividends, for their contribution to the national discussion on how to address global warming.

What resources does the Climate Leadership Council offer?

Their publications can be helpful in showing support for the general concept of carbon fee and dividend and for showing support from conservative and business leaders as well as economists.

  • The Economists Statement on Carbon Dividends. The largest public statement of economists in history including 3,554 U.S. Economists (this spreadsheet list sorted by state), four former chairs of the Federal Reserve, 27 Nobel Laureate Economists, 15 Former Chairs of the Council of Economic Advisers, and two former Secretaries of the U.S. Department of Treasury. 
  • Polling Data. Includes the recent Luntz Global national poll finding 4-1 overall support for the Baker-Shultz Carbon Dividends Plan, including 75% support from Republicans under 40. Note: According to Wikipedia, Frank Luntz, founder of Luntz Global, is a Republican party strategist and pollster.
  • Founding Members. Top corporate statements of support for carbon fee and dividend policies. This group includes a remarkably broad coalition of corporate sector leaders. On their page hover over Founding Member logos and names to read quotes, and see a complete list of statements here.
What are the basics of the Climate Leadership Council's Carbon Dividends Plan?

 They describe the following four “pillars” in their report:

  1. 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."
  2. 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.
  3. 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.
  4. 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 the Energy Innovation Act and the ClImate Leadership Council’s proposal

 

Energy Innovation Act

Climate Leadership Council

Initial price per ton CO2e:

$15.00

$40.00

Annual increase per ton:

$10.00 ($15 if targets not met)

Steadily increasing (by a TBD >10% rate rise)

Use of revenue:

Return to households monthly

Return to households quarterly

GHG’s covered

Many, including methane

Only CO2

Border adjustments

Yes

Yes

Impact on existing regulation

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

Rollback of CPP

Tort liability immunity

None

TBD


Who are the authors of the Conservative Case for Carbon Dividends?

The eight original authors include 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 the Carbon Dividends Plan starting price?

Their carbon tax would start at $40.

What is their rate of increase?

The Climate Leadership Council plan currently does not specify a rate of increase. The Council's 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?

The Council's Carbon Dividends 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 in their original proposal 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 et al., 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) and has a much greater impact on emissions. 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 more resources and white papers available on this proposal on the Climate Leadership Council website: https://www.clcouncil.org/

Go Deeper
Interested in more about the conservative case for a carbon fee? Join the Conservative Caucus Action Team.
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