The Carbon Cash-Back Solution
When pollution is free we get too much of it.
“Explicit carbon prices remain a necessary condition of ambitious climate policies” - IPCC SR15 chapter 126.96.36.199
Carbon Cash-Back is the best way to price carbon because it is predictable and comprehensive, it protects family budgets and US business competitiveness, and it holds other countries accountable for their pollution.
"Carbon pricing is most effective if revenues are... returned to taxpayers corresponding to widely accepted notions of fairness" - IPCC AR6 WG3 Box 5.11
Carbon Cash-Back rapidly reduces climate pollution by putting a steadily increasing carbon fee on fossil fuel production and imports. Most families will receive more money each month in their cash-back dividend than they pay in total higher prices. US businesses will be made more competitive through border carbon adjustments because most other countries pollute more per unit of goods produced than the US.
Here is the elevator pitch for the policy: Carbon Fee and Dividend
This will incentivize the energy efficiency, innovation, transition, and drawdown we need. Additional complimentary policies are also needed, but experts say border-adjusted cash-back carbon pricing is necessary to address climate pollution at the pace and scale we need for our safety.
“We cannot solve the climate crisis without effective carbon pricing.” - US Treasury Secretary Janet Yellen
Over 3,500 US economists agree the cheapest and fairest way to reduce climate pollution is:
1) Charge a steadily increasing carbon fee on fossil fuels at the source (mine, wellhead, and port of entry),
2) Rebate the money collected to all households on an equal basis each month, and
3) Apply our carbon price on imports and rebate our exporters in trade with countries that allow free pollution.
One of those leading US economists, Professor Charles Wheelan of Dartmouth College, explains the power and benefits of the Carbon Fee and Dividend with Border Carbon Adjustments policy at the federal level.
When asked what policies he would recommend at the state level to help prepare for a federal carbon price, Professor Wheelan answered: a moderate state carbon price. "It's like giving your own industries a head start". [start at 1:11:06]
Carbon Pricing Explained with Chickens
This video explains why carbon pricing is an efficient and comprehensive way to reduce climate pollution. But it ends with a good question: "Who's willing to stomach the cost?"
Not us! We can protect household budgets when we fix the failure of the market to account for the costs of using fossil fuels with Carbon Cash-Back.
The Carbon Cash-Back solution is our best first step to reduce the main cause of climate change.
Putting a price on carbon emissions from fossil fuels is the most cost-effective, comprehensive way to reduce climate pollution. We can do this by charging fossil fuel producers a steadily increasing fee based on the carbon in the products they sell (coal, oil, and natural gas). This sends a price signal throughout the economy to motivate reducing carbon emissions.
The fairest thing to do with the money collected is to give all of it to all households on an equal basis (1 share per adult, ½ share per child) to compensate everyone for the harm being done to them by the pollution. This cash-back dividend also protects household budgets from the temporarily higher energy prices, and that lets us put a high-enough price on carbon to do what we need it to do.
This cash-back solution is also known as Carbon Fee and Dividend.
Most families will receive more money in their monthly cash-back dividend than the total additional amount they pay in trickle-down higher prices. Low-income households will come out the farthest ahead.
See how your family does with the Carbon Dividend Calculator.
Border carbon adjustments will protect US jobs and businesses from free polluting countries, and strongly encourage other countries to match our carbon price. That will drive global emissions down as we need for our own safety.
Independent studies have found many additional co-benefits from this solution.
Who says put a cash-back price on carbon?
Nearly everyone who's looked into it.
We get the best solutions when both parties work together to address our biggest challenges.
State and Federal Bills
Who Has Already Put a Price on Carbon?
Sixty-eight countries and regions are already pricing carbon, including Canada, Mexico, the United Kingdom, Germany, Japan, and China. The rest of the world is not waiting for us.
A few countries will claim the lead in producing the clean energy solutions for the global transition to a clean energy economy in the next few decades. Those with meaningful carbon prices are the most likely to become the global energy solution providers of the 21st century.
See the World Bank's 2020 State and Trends of Carbon Pricing report for the rate of adoption and carbon pricing details
Figure 2.2 - Share of global emissions covered by carbon pricing initiatives (ETS and carbon tax)
Figure 2.4 - Carbon price and emissions coverage of implemented carbon pricing initiatives
Canada is using Carbon Fee and Dividend now as the country's back-stop measure, and will reach a carbon price of $135/tCO2 by 2030 [watch 22:57 - 25:52 below].
The EU is implementing a Carbon Border Adjustment Mechanism to charge free-polluting countries its $80/tCO2 carbon price on imports. Canada and other countries that price carbon are likely to soon join the EU in a border-adjusted "carbon club".
Prime Minister Trudeau: "[Canada’s carbon price is] going to rise to C$170 a ton by 2030... And the way we did it is we're actually returning more money to the average family than it costs them on average for the carbon price." - Canadian PM Trudeau - https://www.youtube.com/embed/3fF4XK2X3KA?&start=1378&end=1552&autoplay=1
We know the right carbon price: $100/tCO2 by 2030
A recent study in Nature supports prices in the range recommended by the groups listed at the top of this page. From the study:
These high prices are achievable when we rebate all the money collected back to households on an equal basis each month to protect family budgets and the economy. Complimentary policies will make it possible to hold warming to 1.5˚C.
IPCC recommendation: $135/tCO2 (minimum) by 2030 (SR15 188.8.131.52 Price of Carbon Emissions).
OECD recommendation: $147/tCO2 by 2030 (Pg 4: Box 1, Carbon Pricing Benchmarks, #3)
Groups across the US are calling for carbon pricing
NAS issued a policy manual to guide the nation's energy strategy for the first 10 years of a transition to net-zero carbon emissions by 2050. The report says the prime driver of decarbonization could be an annually escalating federal carbon fee.
Calls for a price “sufficient enough to reduce carbon emissions in line with ambitions detailed in the Paris Agreement on climate change.”
"Inaction is not an option." The Chamber acknowledges the cost of inaction, and supports legislation of "a market-based approach to accelerate GHG emissions reductions across the U.S. economy" that is "practical, flexible, predictable, and durable".
"Business Roundtable urges policymakers on both sides of the aisle to depoliticize energy policy and work with the business community to take swift action on the following suite of policies:"..."Establish a price on carbon that provides a clear long-term signal and incentivizes the development and deployment of technologies to lower emissions, and lead on international efforts to align potential cross-border carbon measures."
“Climate change poses a major risk to the stability of the US financial system and its ability to sustain the US economy.” The CFTC states that "Policies essential to decisively address climate change... include, first and foremost, effective mechanisms to price carbon appropriately."
We will achieve regional cost savings of $100 million - $300 million in ten years by achieving emission reduction targets with a carbon price rather than through regulatory methods.
"Carbon pricing would work to more quickly change the overall economics of all resources in the market, making renewable and low-carbon resources more cost competitive than high-carbon-emitting resources."
This group suggests market-based mechanisms such as carbon pricing could be a powerful, efficient, and cost-effective tool to drive down emissions and achieve state goals while preserving the economic benefits of competitive wholesale electricity markets."
Calls for market-based policies that "facilitate meaningful GHG emissions reductions and conservation from all sectors of the economy", "drive innovation", and "maintain the competitive positioning of U.S. businesses in global markets".
Hundreds have endorsed the Energy Innovation and Carbon Dividend Act.
- US Business Leaders of EBay, Exelon, Gap, Levi's, Nike, Microsoft, PepsiCo, Tesla...
CEOs and other representatives of more than 75 U.S. businesses and trade associations, with combined market valuations of nearly $2.5 trillion, call for a national price on carbon.
Over 150,000 US citizens and tens of thousands more in 60 other countries advocating for national carbon fee and dividend legislation. Success in Canada, US bipartisan bicameral bill introduced, EU & UK looking closely.
Statements of support from dozens of national organizations.
We have no time to waste for our climate - or for our economic future
New Hampshire will never be a fossil fuel producer, but we can become a clean energy supplier to the world and more competitive overall... if we get started right now!
See the En-ROADS climate policy modeling tool from MIT and Climate Interactive to compare the relative effectiveness of different climate policy options and to identify complementary and redundant policies. Carbon pricing is our most powerful emissions reduction tool, and together with complementary policies, it will enable us to hold global warming below 1.5˚C this century if we get started immediately.