Tag Archives: carbon fee and dividend

Carbon fee and dividend – how it would work

In my first post, I introduced the idea of carbon and fee and dividend. Now I want to look at how it would work in the UK.

Fees steadily rise and are economy-wide, paid by companies that sell fossil fuels in the UK. The tax would steadily rise at a rate set by an independent body such as the Climate Change Committee to give the policy institutional certainty and bankability. This would mean that the price of burning fossil fuels account for their true social and environmental costs.

Fees are structured around border carbon adjustments, to create a level playing field for domestic and international producers so that companies which export carbon intensive products into the UK will be subject to the same level of carbon tax as domestic producers, helping industries like the Welsh steel sector.

Dividends from carbon taxation are returned directly to individual households so they can invest in measures to reduce their own carbon footprint and offset any initial increases in energy prices. People should be able to borrow against their future dividend payments for investments in energy efficiency.

Environmental regulations are rationalised without reducing environmental protection. Eventually at least 10 direct carbon taxes would be rationalised into a single unified price paid for emitting carbon dioxide and other greenhouse gases in the UK. For example, we would no longer need the Climate Change Levy, but we should continue with energy efficiency standards and energy labelling.

What would the impact be?

Estimates suggest that we could prevent 230,000 premature deaths over 20 years from improved air quality alone, on top of climate change reversal and we could also create 2.8 million extra jobs.

The REMI Study in the US examined the effect of a progressive fee and dividend (F&D) carbon tax, starting at $10 per ton of CO2 on the national economy as well as the economies of nine regions of the US. The study then compared these results to the baseline case where there is no price on carbon.

Study Highlights:

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The case for carbon fee and dividend in the UK

If we start from the position that in order to slow and halt the climate breakdown we need a root and branch systems change in the way our economy and society is structured and operates, we need to recognise that responses have the potential to negatively impact the least well off in our society.

We know that environmental harms caused by human activity, like air pollution, and that rising energy costs are issues that disproportionately hit the most vulnerable and those with least financial security. 

Every intervention or systems change aimed at slowing the climate breakdown therefore needs to satisfy these questions;

  1. Does this change recognise the magnitude of and respond sufficiently to the threat of climate breakdown?
  2. Does this change meet our obligations to protecting and safeguarding our planet for future generations?
  3. Does this help our economy move to a low or zero carbon footing?
  4. Does this help households adapt their practices and weather the changes in our economy?

Responding to the climate crisis should, fundamentally, be viewed through an economic and social justice lens.

Creating a low or zero carbon economy

Ending our dependence on fossil fuels is one of the biggest changes we could make to slow the climate breakdown.

  • Burning coal, oil, and natural gas is responsible for two-thirds of humanity’s emissions of greenhouse gases, and yet provides more than 20% of GDP in two dozen nation states.
  • Energy accounts for two-thirds of total greenhouse gas emissions and 80% of CO2. Global energy-related CO2 emissions grew by 1.4% in 2017, reaching a historic high of 32.5 gigatonnes (Gt), a resumption of growth after three years of global emissions remaining flat.
  • Emissions from the EU Emissions Trading Scheme (EU ETS) rose by 0.3% in 2017 – the first rise in 7 years.

Moving from dependence on fossil fuels and meaningfully driving rapid investment in renewable energy does have the potential however to leave many people in the UK behind.

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Recent Comments

  • User AvatarPaul Fisher 15th Aug - 3:18pm
    @Anthony Watts - Spot on. The glaring deficiency is that there is no stated vision and strategy (Do members know what I mean?) I DO...
  • User AvatarSue Sutherland 15th Aug - 3:02pm
    Martin, I’m sure David’s OK. It’s just that he can’t cope with Wales doing rather better than Scotland over this.
  • User AvatarPaul Fisher 15th Aug - 2:59pm
    I am certainly not an expat (too many Tory connotations!), nor do I consider myself an expatriate (which technically I am) but as an immigrant...
  • User AvatarMartin 15th Aug - 2:15pm
    David Raw: Are you OK? Your comments appear odd. Of course it is significant that Kirsty Williams is on her own; it makes her a...
  • User AvatarChristine Walters 15th Aug - 1:56pm
    Just a short comment. At the next election, please do not allow the leader of the Lib Dems to claim they can be the next...
  • User AvatarTimothy Tenson 15th Aug - 12:42pm
    The car was not stopped because it was registered in North Yorkshire (though it was) the car was stopped because after the police mistakenly put...