The Case for Carbon Dividends
Tuesday, September 17, 2019
This story was produced as a part of Covering Climate Now, a global collaboration of more than 250 news outlets to strengthen coverage of the climate story.
DIMITRI LASCARIS: This is Dimitri Lascaris reporting for The Real News Network from Montreal, Canada.
The cost of a renewable energy plan that will keep the global temperature increased to manageable levels, help workers in polluting industries to adjust to new jobs, and put the planet on a path of sustainability has been estimated to amount to about 1.5% of global gross domestic product. This may not seem like much, but an investment of almost $2 trillion per year which must be shared by the entire human race is an unprecedented project from a political perspective. How can people be persuaded to support the payment of this money? A new book aims to answer that question. The book is entitled The Case for Carbon Dividends, and it’s written by James Boyce of the Political Economy Research Institute and the University of Massachusetts Amherst.
In his book, Professor Boyce proposes a bold plan to consider carbon emissions as a finite exhaustible resource which belongs to the human race as a whole.
Whenever carbon is used in production, energy, transportation, et cetera, everyone should receive–according to Professor Boyce–a small amount of money to compensate for the loss of that resource. What this means is that although prices will increase for goods and services which consume carbon, the net income of people from low socioeconomic strata of society may actually see a net increase. And this of course is just a side benefit to the main goal of this project; stopping global warming, stabilizing the climate, and saving planet earth from a global climate emergency.
Now here to join us is the author of this book himself, Professor Boyce. He’s from the University of Massachusetts Amherst, as I mentioned. He is the director of the program on Development, Peace Building, and the Environment at Political Economy Research Institute, or PERI. Thank you very much for joining us today.
JAMES BOYCE: Thank you for having me.
DIMITRI LASCARIS: So Professor Boyce, let’s start with the basics. What is a carbon dividend?
JAMES BOYCE: A carbon dividend starts from the idea that if we are serious about trying to address climate change, then we need to limit the amount of fossil fuels that we’re allowing to enter into our economy. And if we put a limit on how much fossil fuel comes in, that’s going to have an effect on prices. It’s going to drive prices to consumers of gasoline and everything else that’s made and distributed using fossil fuels. It’s going to drive those prices up. How much it drives them up is an open question. It depends–among other things–on what other policies we’re also implementing at the same time.
So for example, if we have smart public investment policies on things like mass transportation, it’s going to be easier for people to respond to higher gasoline prices by driving less. And so the prices won’t go up as much as would otherwise be the case. The idea of carbon dividends is that when people are paying these higher prices that come from the supply, the money can be recycled back to the public. And carbon dividends are a way to do so that provides an equal dividend to everyone, to every person in the jurisdiction, the state, or the country implementing the policy, regardless of course of how much carbon they use. So those who use above average amounts of carbon come out behind. If you fly a lot in airplanes or heat or cool a very big house, your dividend won’t cover your extra costs.
On the other hand, everyone who consumes below average amounts of carbon comes out ahead. Their dividends reflect the consumption of those who consume more than them. And so in the way that income and spending are distributed in our society, what that means is actually the majority of the people come out ahead because income and expenditure–and carbon footprints that go with them–are so heavily skewed to the top. So carbon dividends are a way to translate the limited carbon space we have. The limited ability of the atmosphere and the biosphere to absorb more carbon emissions into something that is no longer free. It’s limited and its use generates income that’s shared by all, based on the principle that we all own that limited capacity in common and equal measure.
DIMITRI LASCARIS: The first chapter of your book is dedicated to the reasons for cutting carbon, and those are certainly compelling. But in addressing these reasons, you also–I think it’s fair to say–express some disdain for those, and understandably so, who deny the science of climate change. And we can see for example, you did that through a cartoon you chose to incorporate into that first chapter. Some would say however, that we need to take these points of view a little more seriously, or at least engage them a little more seriously in order to fight them effectively. How do you respond to that critique?
JAMES BOYCE: Well, I think you’re right about that. The battle to bring the science home is not totally over yet. But I think that battle is largely being won. And particularly it’s being won among the youth of our country and the youth of the world, for whom the prospect of serious climate destabilization is really no joke. And it’s something that I think most of them get. The cartoon you referred to actually doesn’t sort of dismiss or make fun of climate denial, but instead it’s there to drive home a basic point. In the cartoon, it shows a speaker describing all the side benefits that come with reducing our reliance on fossil fuels. Including, above all, cleaner air, particularly for people who live in heavily polluted communities; as well as potentially other, if you will, side benefits, including more employment because reducing the emissions is going to create jobs, as my colleague here at PERI, Bob Poland, has written about at length. And also because if you do have a carbon dividend as one part of the policy mix, you’re going to make a dent in income inequality by recycling the revenue, as I’ve described.
So these are all ways in which even if one didn’t believe that climate change is a real problem–and of course I believe it is–but even if one didn’t, one could still advocate for and be happy about a policy that raises the price of fossil fuels by limiting their supply and recycles the revenue, because it would generate these other benefits. And an important thing about these other benefits; clean air, jobs, dividends, is that there are benefits here and now, not way off in the distant future. And there are benefits in the particular political jurisdiction, the state or the country that’s implementing the policy. Whereas the benefits from reducing climate change, mitigating climate change by reducing fossil fuel emissions, those benefits extend far into the future. And those benefits are shared with people worldwide.
Now, I’m all in favor of thinking about future generations and I’m all in favor of thinking about people worldwide. But if that’s the only benefit that one sees from the policy, it begins to have what I sometimes call a kind of “eat your broccoli” taste to it. It’s like, “Well, we should do this because it’s good for other people. We need to tighten our belts. We need to suffer, da da da.” I don’t think that’s the kind of message that is likely to win broad based public support quickly enough to do what we need to do. Nor is it the right message. Because the clean energy transition–if it’s done right, if it’s done in a way that benefits everyone and not just the 1%–that clean energy transition can be a great thing for people here and now, and a great thing for people in the places that are moving most quickly to reduce their dependence on fossil fuels.
DIMITRI LASCARIS: Environmental leftists on the left have critiqued the idea of a carbon tax, because they view the… They’re essentially of the view that the only real solution, given where we currently stand in this existential crisis, is to cap extraction and consumption; put absolute limits on it. And they’ve often said or suggested that carbon pricing implies that polluters can pay their way to cause irreversible damage to the environment. You addressed this critique in your book, and if could just summarize for us how you respond to the critique?
JAMES BOYCE: Yeah. Well, basically I agree that we need to keep the oil in the soil. We need to keep the coal in the hole. We need to keep the fossils in the ground. This is the basic starting point for any serious climate policy. But it’s important to recognize that when we do that, when a country or a state says, “We’re not going to allow any more fossil fuels into our economy than a certain amount,” that diminishes by say … Well, it depends what your target is. But if you want to cut down to 15% of our current level in 30 years, you’re going to have to cut the amount of fossil fuels being used by 6% a year. That’s pretty straightforward math. So you need to have a limit on the amount of fossil fuels coming into your economy. And putting such a limit on the amount that’s available, cutting supply, is inevitably going to raise prices. It’s just basic economics, folks: If you cut supply, prices go up.
And so the question is, how can we do that in a way that’s fair, in a way that doesn’t disadvantage low income families and whack the middle class; that doesn’t provoke the kind of political reaction that we’ve seen in France in the past year in the yellow vest movement, where a relatively modest addition to that country’s carbon tax provoked a big outcry from working people? Because they said, “Look, the government worries about the future of the world–well, the end of the world. We worry about the end of the month.” And there are a lot of people who worry about the end of the month, and it’s quite right that they should.
And so we need to develop a policy that’s not only going to keep fossil fuels in the ground but is going to ensure that it does so in a way that doesn’t harm working families. And that’s what carbon dividends do. If all you did was keep the fossil fuels in the ground… If you sort of imagine that we succeeded in shutting down oil production in a given country, in this country, say, the United States–or ratcheted it down over time, and coal production and natural gas production as well–imagine we did that. Well, what’s going to happen? Well, at least until the rest of the world steps up its production to match our cuts, what’s going to happen is the price is going to go up. So anything that is keeping the fossil fuels in the ground is de facto a carbon price policy. It may not start with a price; it starts with a limit. But as a result of that limit, as an artifact–if you will–of that limit, you get a price.
Now, one last thing, let me say about this, Dimitri. That doesn’t mean that you need just any old carbon price. Many of the carbon price proposals and some of the criticisms of carbon pricing are founded on the quite correct point that if you just pick a price, it may not be high enough to do the job. And in fact, most of the actually existing carbon prices we have in the world today–including most in the United States–are not high enough to really make a big dent in carbon emissions. So rather than just picking a price and hoping for the best, what we need to do is put a limit on the amount of fossil fuels we allow into the economy, let the price go up as much as that limitation results in, and recycle the money back to protect the purchasing power majority of the people. And that’s what a carbon dividend does.
DIMITRI LASCARIS: And just briefly, Professor Boyce, before we close out this interview; you mentioned the inadequacy of most of the carbon pricing schemes in effect today. Here in Canada where I’m situated, we’re heading into a federal election. And this is front and center in the election. It’s a major, major issue, if not the most important issue to voters, and polls are showing that in Canada. And in that debate about how we’re going to deal with a climate emergency, there is considerable discussion and quite opposed views about the adequacy of Justin Trudeau’s carbon pricing scheme which has recently been put forward. Have you had an opportunity to examine that carbon pricing scheme as it currently exists? And if you have, in your view, is that adequate–the current carbon price–or is it one of those schemes that falls into the category of inadequacy?
JAMES BOYCE: You know, I don’t know the details of what initial price Trudeau has proposed. Nor perhaps more importantly, the details on how that price should change over time in response to the need to maintain a steady and ambitious trajectory of the emissions reductions. But what I do know is that very, very few carbon pricing policies that have been implemented so far have started from the principle that we’re going to reduce the amount of the emissions by something ambitious enough to achieve anything close to the Paris targets, by something like six or seven or even eight percent per year; and then we’re going to let the price adjust. And as I said at the beginning, it could go higher. It could go lower depending on, among other things, what other complimentary policies we’re implementing along with the limit on the use of fossil fuels.
If we’ve got smart public investment policies like mass transit, if we’ve got smart regulations like fuel efficiency standards, for example, those things are going to have an important and beneficial impact and will reduce the demand for fossil fuels. So it means the price won’t go up as much as would otherwise be the case. So in evaluating any carbon pricing policy, I think a very important issue–in my view, a crucial issue–is whether the price is tied to a hard limit on emissions and emissions trajectory. And if it is, you aren’t just setting a price and hoping for the best. You are actually guaranteeing that you’re going to get the emissions reductions you’re aiming for, because that’s all the fossil fuel you’re allowing into your economy. Merely setting a price and hoping for the best isn’t good enough. By the same token, merely investing in mass transit and hoping for the best, or merely having regulatory standards and hoping for the best, it’s not enough.
We know those things will help, but we don’t know how much they’ll help. We can’t be certain how much emissions reduction will result. And in my view, we’re really past the stage at this point where we can just make policies and hope for the best. We need to be sure that we’re moving on a trajectory that’s going to reduce our emissions very, very sharply over the next three decades. And we need to face up to the realities that come with that objective, which is potentially higher–and maybe much higher–prices on fossil fuels and how we’re going to deal with the question of who’s going to get that money.
DIMITRI LASCARIS: Well, we’ve been speaking to Professor Jim Boyce from the University of Massachusetts Amherst about his new book, the Case for Carbon Dividends. Thank you very much for joining us today, Professor Boyce.
JAMES BOYCE: Thanks so much for having me. It’s been a pleasure.
DIMITRI LASCARIS: And this is Dimitri Lascaris reporting for The Real News Network.
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