“Fee and Dividend” Carbon Tax

Heard Ed Atkinson of Citizens’ Climate Lobby UK speak last night at Teesside “Skeptics in the Pub”. Although they’re already a decade old, and I have long-standing interests in the energy business and in climate change science and policy, it was the first time I had really been aware of CCL and their very specific climate policy.

It was a very impressive message.

Given my underlying epistemological scepticism – “Yeah, but how do we know?” and the fact that I am sceptical about both scientific & political climate-change predictions – particularly those that claim to be objectively evidence-based and quantifiable – many assume I must be a climate-change sceptic.

In fact the existence of Anthropogenic Global Warming and the need to do all we can to minimise CO2, volatile-hydrocarbon and low-grade heat emissions from our human activity has always been a no-brainer. Simply common sense. 1st and 2nd laws. As an engineer, where there’s a will, there’s a way. The problem has always been politics and political economics.

The beauty of Ed’s talk was that, whilst he did throw up a few graphs and numbers to illustrate the scale of what we’re dealing with, none of his conclusions – or the CCL policy recommendations – are particularly dependent on any actual numbers or calculations assumed. Basically, which things will drive the relevant factors in the right direction with greatest predictability & manageability and the least unintended incentives to corrupt & game the system.

It needs the caveat – all other things being equal – we’re talking about the carbon economy part of the whole global economic activity here, where businesses and governments will have plenty of other drivers and incentives in play. The point of the CCL proposal is to apply the economic controls at points where they are least in conflict with the other drivers on activity and investment.

Simply:

  • The Carbon Tax or “Fee”. Leave fossil fuel in the ground or, if you do extract it, tax it progressively at that point of extraction.
  • The Benefit or “Dividend”. Divide the tax take to be paid equally and directly to all individual participants in the economic and ecological environment through existing tax allowance and benefit payment schemes.

The beauty of this approach is that it addresses the tragedy of the commons directly by putting government taxation in the role of the common interest, and giving the individual interest – environmental and economic – directly back to the individual. The market looks after the rest. The individual makes the lifestyle choices as the consumer, and the whole supply chain for energy, goods and R&D is then driven from that end. If that’s not enough, governments (with public support) can still provide subsidies from general taxation to the development on alternative energy technologies, without upsetting the incentives in the main scheme.

Particularly encouraging is that the simplicity and predictability, the avoidance of regulatory bans and risk of market shocks, means that more conservative Republican political and big-energy big-business interests appear to see this as the best option of a set of worse taxation and regulation choices. It could be win-win.

Seems a no-brainer to support this recommendation.

Plenty of lively discussion from an audience committed to the issues and a talk that had inspired much interest. The big take-away, beyond the detail and mechanics of the policy scheme itself, was the realisation how much any such scheme would be dependent on global / international government agreement to implement. Particularly salient in our time of increased noise for nationalist interests. However with China already committed to massive alternative energy investment and other western trading blocks already collaborating, even if the global agreement can only ever be partial, we nevertheless all benefit as the major part of the “commons”.

It may be brutal, but it’s no tragedy.


Also published on Medium.

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