It’s also known as ‘climate income’ – money in the bank to support households in a decarbonising economy.

Put simply, it is a monthly deposit in Aussies’ bank accounts derived from the fee on the carbon content of fossil fuels. It is paid in equal shares to all eligible Aussies.

It is the simplest way to put the real costs of fossil fuels into prices without penalising citizens who are already paying increasing costs in terms of their health, and the mounting costs of extreme weather and environmental damage to our society.

More info here: citizensclimatelobby.org/laser-talks/carbon-dividend-distribution/

First, simplicity: Transferring money from fossil fuel companies to the Australian people is easy to understand as the money doesn’t go into government coffers. Simpler policies like this have a higher level of integrity.

Second, political will: Receiving cash in the bank every month means people across the political spectrum will feel more inclined to support the policy.

Third, effectiveness: A dividend enables the price to rise high enough to drive emissions down fast enough to be effective. This could be as high as $200/tonne. Without a dividend, governments will have to keep the price much lower than this for fear of seriously disadvantaging a large portion of the population.

No. The net benefit for each household will depend on its reliance on carbon-intensive products. Put simply, low-income households would be better off, the average household would gain. Only households who use a lot of carbon would be worse off.

In the 2018 paper linked above, Prof. R. Holden and R. Dixon from UNSW modelled the effect of a climate dividend on Australian society. They found that three-quarters of households will gain from the scheme. Moreover, the economic benefits were found to be the highest for households in the lowest income bracket.

The dividend ensures that those least able to afford the transition are able to participate in decarbonising their economy.

Yes! A particular carbon fee and dividend scenario has been modelled by UNSW and presented as the Australian Climate Dividend Plan. In the United States, a comprehensive study was undertaken by Regional Economic Models, Inc. (REMI) and found that under a carbon fee and dividend scheme:

• Carbon emissions from fossil energy would decline 33% after 10 years, and 52% after 20 years, relative to 1990 levels;

• Economic activity would be stimulated by 5% over ‘business as usual;

• 66% of people would be better off financially.

• 100% of low- and middle-income households would be better off financially.

With 100% of net revenue returned to households and a significant majority of consumers coming out ahead of rising costs, people would have more disposable income, which would encourage spending, stimulate the economy and expand total investment in the energy economy.

Between about 2007 and 2008 there was a degree of bipartisan political support for carbon pricing in Australia. Following the defeat of the Carbon Trading Scheme in 2008, carbon pricing and climate policy was politicised, and the parliament and nation became divided. The failure of the CoP climate conference in Copenhagen to reach agreement made it harder to maintain unity in Australia.

The Clean Energy Act of 2012 implemented a carbon price that was quickly repealed after a divisive election and a change of government.

In the meantime, other nations continued to introduce various forms of carbon pricing.

The Paris Agreement of 2015 created increased momentum for climate policy and for carbon pricing, including in China. The revolution in renewable energy technology and its rapid uptake have made mainstream business and the general community more supportive of reform.

Unfortunately, the climate dividend was unknown in 2008 when carbon pricing was being debated. A dividend paid to households would have gone some way to bridging the partisan divide and would have been difficult to repeal. The climate dividend is simple and transparent and people are more likely to understand it’s benefits, for themselves as well as for environment and economy. Prominent US conservative, Ted Halstead, called it “A Climate Solution Where All Sides Can Win”

The climate dividend recycles 100% of the revenue back into the economy via the monthly dividend paid to households. In the US, REMI modelling found that two-thirds of households would be financially better off if a climate dividend were implemented. Similar modelling by the University of NSW found that three-quarters of Australians would benefit from an Australian climate dividend.

In 2017, 84 members of the US Congress – 50% Democrats and 50% Republicans formed a Climate Solutions Caucus, with CCL support. The Caucus strived to foster respectful bipartisan dialogue to help solve dilemmas of climate and energy policy. CCL helped establish the Parliamentary Friends of Climate Action for the same purpose.

The climate dividend has enormous potential to generate bipartisan support for carbon pricing. Bipartisanship is vital if we are to enact an effective and durable climate policy – now an important expectation of the business community, who are already pricing carbon internally and calling for a carbon price through industry bodies like the Business Councils of Australia and the Australian Industry Group.

Carbon pricing requires legislation to enable the regulation of carbon emissions, preferably at the national level. Such legislation would put a fee on carbon dioxide equivalents attributable to the use and extraction of fossil fuels. This fee would be assessed at the fuel’s source: the mine, well or port of entry. The fee would start out low and rise annually in a predictable manner until Australia reaches a ‘climate-safe’ level of emissions – 90% below 1990 levels.

The fee would be collected at source and all fees collected, minus administrative costs, would then be reimbursed directly to all Australian households. This would shield them from the financial impact of the shift to a cleaner energy economy. Their spending will stimulate the economy towards increasingly cheaper low carbon activity and make high carbon activity increasingly expensive. This enables citizens to participate in decarbonising the economy by spending on low carbon alternatives. .

Because the fee and the price of fossil fuels would go up predictably over time, CFD would send a clear price signal to investors, consumers, businesses, and the wider economy to:

• Use fossil fuels more efficiently;

• Replace fossil fuels with low- or zero-emissions energy;

• Invest in low-emissions technologies; and

• Bring the true cost of fossil fuels onto the balance sheet.

This would:

• Internalise the social costs of fossil fuels into their price, thus phasing out the implicit subsidies that derive from fossil fuels being allowed to pollute for free

• Increase the demand for low-emissions products, making them increasingly more affordable;

• Drive growth in the new economy;

• Reduce greenhouse gas emissions, thus stabilising the climate, improving human health and restoring the health of the oceans.

No. Collecting a fee from fossil fuel producers and importers would be a relatively simple as the number of companies affected is fairly small. The costs of collecting and administering fee and dividend would be paid out of the fees collected.

Yes. By returning the net revenue back to households — the end-users — consumers would be able to pay the higher prices of goods and services caused by the higher price of fossil fuels. This would allow businesses to pass on their increased costs and maintain their market share.

Each year that the carbon tax increased, the dividend would rise as well. Everyone would be on a level playing field for the first few years. But if businesses failed to become more energy-efficient and failed to reduce their emissions, they would become less competitive and lose market share.

Market forces would therefore drive innovations in low-emissions technology, creating new business opportunities to develop, produce, install and service these products. This would create thousands of new jobs here in Australia. Companies would be able to sell these technologies globally and become more energy-efficient themselves, thereby becoming more competitive worldwide.

The clear price signal provided by the Climate Dividend would drive many of the changes that currently require complex legislation and regulation at higher cost. It will enable the market forces to make the many choices needed to decarbonise our economy. It will enable an orderly phase out of many high carbon products and services and enable business and consumers alike to transition with minimal regulation and funding.

For example, the electrification of transport, heating and cooling, and industrial production will occur naturally due to market forces. Fossil fuels will phase out relatively smoothly as renewables become more abundant. Fossil fuel companies will be able to reinvest in low- or zero-carbon activities and avoid the high risk of crashing as the economy decarbonises around them. It will also reduce the risk of Australia being left with stranded assets.

A Climate Dividend would provide a firm foundation for the many complementary policies that will be required to decarbonise our economy. For instance, the Safeguard Mechanism, designed to reduce industrial emissions, will be less onerous because the fossil fuel component of their emissions will have been priced at source. The mechanism can therefore focus on non-fuel related emissions such as those that come from cement production.

Some less efficient polices will become redundant. The Emissions Reduction Fund which uses taxpayer dollars to buy carbon abatement from emitters would no longer be necessary. Risky carbon offsets would become less necessary and carbon removal technologies can be dedicated to mopping historical emissions instead of offsetting current ones.

State governments have provided most of Australia’s decarbonisation polices in recent years. They will be able to re-evaluate their programs and drop or amend the ones that would be covered by the Climate Dividend. This will free them up to focus on the ‘hard to abate’ parts of their economies.

Importantly, the Climate Dividend would enable Australia to decarbonise ahead of its Paris Agreement schedule and take a leading role in the global race to zero emissions.