CARBON PRICING: FEE & DIVIDEND

No plausible scenario can achieve climate stabilization without placing a continually increasing price on carbon.

James Hansen, the world’s leading climate scientist, has proposed a detailed Carbon Fee and Dividend approach (see below). The plan attaches a continually increasing fee to CO2 emissions at the fuel source; all the fees are equally distributed to the public. An estimated 70% of households would receive as much or more from the dividend as they would pay for higher energy costs. Exporting nations must either adopt similar carbon pricing or pay a carbon fee adjustment at our border—essentially forcing all countries to place similar fees on carbon.

It meets the critical criteria of:

• Transparent, fair, rational regulation
• Quickly implementable
• Provides a stable, predictable carbon price signal
• Carbon is priced at the source—
• Businesses don't directly absorb costs
• Addresses emissions in every sector
• Incentivizes CO2 reductions and efficiencies
• Stimulates innovation, research and development of low-carbon energy
• Widely opens entrepreneurial and job-creation opportunities
• Offsets citizens' higher energy costs with the only progressive carbon price
• Not exploitable by special interests
• Necessitates worldwide adoption

PEOPLE’S CLIMATE STEWARDSHIP / CARBON FEE AND DIVIDEND ACT OF 2010

Collection of Carbon Fees/Carbon Fee Trust Fund: Beginning on July 1, 2011, a carbon fee of $15 per ton of CO2 equivalent emissions will be imposed on all fossil fuels at the point of first sale in the U.S. economy. CO2 equivalent fees shall also be imposed for other greenhouse gases including methane, nitrous oxide, sulfur hexafluoride, hydro fluorocarbons (HFCs) emitted as byproducts, perfluorocarbons, and nitrogen trifluoride. All fees are to be returned to American households as outlined below.

Steady step-up of CO2 Fees, Ensuring Replacement of Fossil Fuels with Low-Carbon Energy: The yearly increase in carbon fees including other greenhouse gasses shall be at least $10 per ton of CO2 equivalent each year, to steadily reduce U.S. CO2-equivalent emissions by 2050 to 10% of the 1990 U.S. CO2-equivalent emissions. EPA and DOE shall annually review greenhouse gas emissions data and determine whether an increase larger than $10 per ton per year is needed to achieve emissions reductions commensurate with that reduction trajectory. If EPA and DOE find that U.S. emissions are not being reduced sufficiently, the CO2 fee shall increase by $15/T CO2 in the following year.

Mechanisms for 100% Revenue Return: All revenue from CO2 and CO2 equivalent fees shall be returned to households. Mechanisms include: (1) Equal monthly per-person “dividend” payments made to all U.S. households (1/2 per child under 18 years old, with a limit of 2 children per family) each month beginning on August 28, 2011, (2) Use all carbon fee revenue to reduce payroll taxes for employers and employees. Unemployed persons and Social Security recipients shall receive equivalent distributions.

Border Adjustments: To ensure that U.S.-made goods remain competitive abroad and to provide an additional incentive for U.S. trading partners to adopt their own carbon fees, Carbon-Fee-Equivalent Tariffs shall be charged for goods entering the U.S. from countries without comparable Carbon Fees. Carbon-Fee-Equivalent rebates shall reduce the price of exports to such countries and ensure that U.S. goods remain competitive in those countries.

Phase Out of Fossil Fuel Subsidies: All existing subsidies of fossil fuels including tax credits, shall be phased out within 5 years.

Moratorium on New or Expanded Coal-Fired Power Plants without CCS: No new coal-fired power plants shall be permitted, constructed, or operated. No expansions in capacity of any existing coal power plants shall be permitted, constructed, or operated. [Exception: Permits may be issued for facilities that successfully demonstrate safe and effective long-term Carbon Capture and Sequestration of at least 90% of CO2 emissions.]

Seeking Treaties: The President shall seek treaties with other countries that encourage adoption of similar programs to reduce CO2 and other greenhouse gas emissions worldwide.

Created by the Citizens Climate Lobby and proposed by Dr. James Hansen on Earth Day, April 25, 2010