Benefits of the
Cash-Back
Carbon Pricing Approach

Studies on the effects and benefits of the Carbon Fee and Dividend policy have been done by several independent organizations. All project rapid climate pollution reductions and many co-benefits for our health, low- and middle-income family budgets, and jobs.

The benefits include:

  • US carbon emission reductions of 40% in twelve years and 90% in thirty years.

  • Two-thirds of all families will receive more cash back than the total they pay in higher prices, especially the low- and middle-income families.

  • 2.1 million jobs created (net) in ten years.

  • 295,000 lives saved in the first ten years from rapid reductions in air pollution, including a 95% reduction in mercury and SOx emissions.

  • Global reach. Carbon pricing with border adjustments protects US jobs and reduces emissions across national borders.

Kaufman, et al, Columbia University

Quotes from this independent study of the federal carbon fee and dividend bill, the Energy Innovation and Carbon Dividend Act (EICDA):

  • "A price on carbon is a uniquely cost-effective policy tool because it incentivizes emissions reductions wherever and however they can be achieved at the lowest cost. That is why economists almost universally support putting a price on carbon."

  • "Economy-wide net GHG emissions reductions of 32–33 percent by 2025 and 36–38 percent by 2030."

  • "EICDA’s use of revenues for equal carbon dividends creates a highly progressive policy: on average, low- and middle-income households receive more in rebates than they pay out in increased prices of carbon-emitting services and products"

  • "Sulfur dioxide (SO2) and mercury emissions from the power sector decline by more than 95 percent and emissions of oxides of nitrogen (NOx) decline by about 75 percent by 2030 relative to a current policy scenario."

The impact on the finances of U.S. households

Kevin Ummel, Greenspace Analytics

University of Pennsylvania

This study of the impacts of the Energy Innovation and Carbon Dividend Act on various demographic groups found that direct economic gains are concentrated among those considered most vulnerable within our society: those with lower incomes, the youngest and oldest, and minorities.

  • Two-thirds of all Americans come out ahead (the carbon dividend exceeds the increased costs of goods and services)

  • The poorest households benefit the most - not through means-testing, but simply because anyone with a smaller than average carbon footprint comes out ahead.

  • Residing in an urban, suburban, or rural community has very little impact on how well a household does under this policy

The highly progressive effect comes from charging fossil fuel producers for their climate pollution and returning the proceeds to everyone on an equal basis. This bipartisan approach is not a social policy of income redistribution, it simply creates a more efficient energy market and compensates people equally for damages from climate pollution.

See the Household Impact Study Summary for details.

Regional Economic Modeling Inc. (REMI) and Synapse report on the Carbon Fee and Dividend Policy

This 20-year study on the results of the Carbon Fee and Dividend policy found it creates jobs, grows the economy, saves lives, and makes Americans richer. It does so while efficiently reducing CO2 emissions by over 50% in twenty years.

Some of the benefits identified in the first ten years for the USA:

  • 33% carbon emissions reductions and dropping rapidly

  • 2.1 million jobs created (net)

  • 90,000 premature deaths prevented from reduced pollution

  • $1000 average annual personal income gain (for the New England region)

See the REMI National Summary and REMI Regional Summary for details.

US Treasury, Office of Tax Analysis

This study of the economic impact of a fully-rebated carbon fee of $49 per ton CO2 on fossil fuel production identified a strongly progressive result:

  • the lowest income decile would experience an 8.9% increase in average after-tax income while the top income decile would only experience a 1% decline (page 26).

Anyone can come out ahead simply by reducing their carbon footprint to below average.

The full report is available here.

The greenhouse gas pollution-reducing power of cash-back carbon pricing can be seen in the expected results.

This graph provides a comparison of the expected emissions reduction results and the required emission reduction targets of the Energy Innovation and Carbon Dividend Act (EICDA) compared with the reductions needed to achieve the IPCC's goals.

Dashed blue line - the estimated emissions reductions based on extending the HR763 carbon price around the world. A global carbon price is expected to develop in response to the border carbon adjustments.

Green circles - the annual emissions reduction targets specified in EICDA. If an emissions reduction target is not met, that year's annual carbon fee increase will be $15 (inflation-adjusted) rather than the minimum $10 per ton of CO2 equivalent greenhouse gas emissions. After the first years, the EPA will be required by Congress to put regulations in place to meet targets if they are not being met. This fail-safe is not expected to be needed, but addresses the current problems that the Clean Power Plan ran into that have tied regulation of greenhouse gas emissions up in courts.

Source: CCL analysis.