The Climate Dividend: a brief explanation
Harvesting the wind
What is it? A fee charged on carbon emissions produced by burning fossil fuels, levied on the producers, and distributed as a dividend equally to all Australian households.
Why? Increasing the costs of fossil fuel discourages their use and encourages the use of alternative renewable energies. Providing a dividend to consumers means any extra costs to them can be met. Consumers will be encouraged to use alternative forms of energy; by not buying carbon emitting products, consumers will be in pocket from the dividend.
How? The fee would be levied at the point of entry of the pollutant, for example coal mine, oil well, port of entry, perhaps $50 per tonne, rising annually. The Australian Taxation Office would monitor its collection and distribution.
Who benefits? The planet.
Equal distribution creates a socially fair dividend which particularly benefits lower income households who may consume less than higher income households. It is estimated that the lower 20% of households would be $1300 p.a. better off.
The average household would benefit by $585 p.a. 75% of all households would receive financial benefit.
Subsidies and regulations for renewable energy would no longer be necessary and could be removed. Estimates suggest the rollbacks have the potential to save the Commonwealth $2.5 billion per year.
Another tax? It does not increase overall taxes, in fact households are paid to reduce carbon emissions.
Increased costs? Putting a price on carbon is simpler and cheaper than the alternatives such as subsidies to zero emissions technology, payments to companies to reduce emissions or a cap on emissions.
Trade disadvantage? Where no comparative system exists overseas, exports could be protected by a rebate and charges levied on imports.
Who says? From research by:
Rosalind Dixon, professor of law at UNSW Sydney. Previously on the faculty at the University of Chicago Law School, she holds an SJD and LLM from Harvard.
Richard Holden, professor of economics at UNSW Sydney. He was previously on the faculty at the University of Chicago and MIT and holds a PhD in economics from Harvard University.
Who’s doing it? Canada and Switzerland have established schemes, USA is considering legislation for a scheme.
So what?
Without a carbon dividend scheme, we will be at a competitive disadvantage against other countries, who will impose carbon tariffs on our exports.
We will miss an opportunity to encourage other countries to enact a carbon reducing dividend.
Costly subsidies to particular forms of energy such as renewable energy, currently estimated at $2.5 billion annually, would need to be maintained to meet our emissions commitments.
