This is the final installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture for the Climate Change Series at the University of Pittsburgh Honors College. This installment lays out his case for a cap-and-dividend policy, which Boyce argues would put into practice the “widely held philosophical principle … that we all own the gifts of creation in equal and common measure.” The first four installments of the series are available here, here, here, and here.
The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.
The Case for Cap and Dividend
A carbon price is a regressive tax, one that hits the poor harder than the rich, as a proportion of their incomes. Because fuels are a necessity, not a luxury, they occupy a bigger share of the family budget of low-income families than they do of middle-income families, and a bigger share for middle-income families than for high-income families. As you go up the income scale, however, you actually have a bigger carbon footprint—you tend to consume more fuels and more things that are produced and distributed using fuels. You consume more of everything; that’s what being affluent is about. If you’re low-income, you consume less. So in absolute amounts, if you price carbon, high-income folks are going to pay more than low-income folks.
Well, under a policy with a carbon price, households’ purchasing power is being eroded by that big price increase, that big tax increase. But money is coming back to them in the form of the dividend. Because income and expenditure are so skewed towards the wealthy, the mean—the average amount money coming in from the carbon price and being paid back out in equal dividends—is above the median—the amount that the “middle” person pays. So more than 50% of the people would get back more than they pay in under such a policy. As those prices are going up, then, people will say, “I don’t mind because I’m getting my share back in a very visible and concrete fashion.” I would submit to you that it’s politically kind of fantastical to imagine that widespread and durable public support for a climate policy that rises energy prices will succeed in any other way.