Comparing the Citizens Climate Lobby and the Climate Leadership Council Carbon Fee and Dividend Plans

Comparing the Citizens Climate Lobby (CCL) and the Climate Leadership Council (CLC) Carbon Fee and Dividend Plans

The CLC has been put forward by an Οp-Ed in the Washington Post, and the “The Pricing Advantage” by George R. Schultz and Ted Halstead.  It is also called the Baker-Schultz Carbon Dividends Plan.   The CCL and CLC are very similar, but different in startup Carbon fees and in yearly increases, as well as frequency of dividends to consumers.  Both collect taxes or fees per ton of carbon dioxide emission potential at the first usage.  The fees are then redistributed equally on a per capita basis as dividends, at regular periods of a year.  The differences are in the details.  CCL starts at $15 a ton and increases $10 per ton per year.  In a separate paper by Halstead, the CLC starts at $40 per ton per year, and increases the fee 3% to 6% a year, or at most, $2.40 a year in increases.  CCL plans monthly dividends, and the CLC plans quarterly dividends.  Maybe the difference is that the CLC is proposed as a Republican type solution, while the CCL is mostly backed by Democrats.

Last year, we analyzed the CCL and general climate taxes on gasoline, household electricity and natural gas, and the general case of all per capita emissions charges.  The general charges get added onto other consumer purchases, but so far, invisibly.  California and related states have had a cap-and-trade tax, but give back the collection to low income causes, so it is a progressive tax.

The problem of converting to electric cars is that at present they can cost $9,500 more than a similar gas powered car.  However, they generate only about 20% of the emissions from the present average gas powered auto.  The fuel savings over the car’s lifetimes make up for the initial cost difference.  What we need is a financing mechanism or companies that can advance the cost and profit from the savings.  This is done sometimes  in solar cell installations.  One source said that battery costs are only declining 4% a year, while another said that by 2025, electric cars would cost the same as gas models do.  NY Times economist Paul Krugman also points out the need to fund innovation in research and development for climate solutions.

First, we show how CCL and CLC rates per ton of CO2 emissions progress each year.  We use the 6% yearly increase for CLC, which we take yearly as a $2.40 increase, for simplicity.

Year.       CCL tax.       CLC fee.

1.                 $15.             $40.00

2.                $25.             $42.40

3.                $35.             $44.80 

4.                $45.             $47.20

5.                $55.             $49.60

6.                $65.             $52.00

We see that at year 5, the CCL tax passes the CLC fee.

The results of the earlier analyses was that a 15,000 mile per year commuter at an average 25 mpg will use 600 gallons of gas, and generate 6 tons of CO2 emissions.  At a country-wide average gasoline price of $2.50 per gallon, the 600 gallons will cost $1,500 a year.

The total per capita US greenhouse gas emissions are 22.3 tons of CO2 per capita.  We evaluate the carbon taxes for both carbon taxes, for both gasoline and per capita emissions.

For gasoline for a commuter, with CCL, the 6 tons of emissions at the $15 per ton start will pay a $90 per year tax.  Each year that the tax increases $10 per year per ton, adds $60 per year in the carbon tax on gasoline.  At the end of the fifth year, the tax will be $390, on the $1,500 cost, or 26%.  

 Total collection in the US can be found by noting that the US emissions in 2015 were 7,250 million tons.  Multiplying by $15/ton for the start in CCL gives $109 billion, to be collected and then redistributed.  Each succeeding year will add $10/ton or another $73 billion.  Distributed across 325 million Americans, that is collecting from all sources, passing on costs, but then equally redistributing $335 per person at the start, and increasing that by $225 per person, per year.  In 10 years, that will become $335 + 10x $225 = $2,575 per year.  

The average per capita US income in 2018 is $53,825, so that is 4.8%.  But, since income is skewed to the wealthy, the median per capita income is $33,706.  The carbon tax is then 7.6% of that.  The median income is a little higher than a $15/hour minimum wage for a 40 hour x 50 week = 2,000 hour year, which is $30,000 before deductions.  (The California minimum wage is $12/hour). The actual minimum wage in the US is $7.25 per hour, less than half of the dreamed of $15/hour, and gives $14,500 per year.  The carbon tax after 10 years is then 17.8% of the minimum wage, or more than a sixth.  A quarterly dividend on $2,575 is $644.  The statement is that 40% of Americans don’t have $400 in the bank in case of emergencies. Clearly, a $644 deficit for them over three months is crazy.  The distributions have to at least be monthly, in which case it would be $215.  Even that is large.  Remember, that a lot of wages are paid weekly.  And many people live week to week.

The CLC start at $40/ton gives $290 billion a year to start, and that is a per capita bill and then distribution of $892 per year, or $223 per quarter, or $74 per month.

Some potential problems with the Republican plan:

  1. When the government gets tax money, it finds it very had to give it back, or to not gently repurpose it.  Hey, isn‘t Trump being impeached for this, and isn’t McConnell going to bury that?  Trump is now repurposing $7.5 billion of DoD money for his promised border wall, to benefit himself politically.  There are billions needed to rebuild each year from climate effects, more often in Republican states.
  2. Are the Republicans really going to give equal distributions to everybody, instead of more to the rich, with their private jet’s fuel usage?  Not to mention their yacht.  Give me a break.  We are $2 trillion poorer under Trump already from his tax cut to the wealthy.
  3. Democratic states like California, Washington, Oregon, and New York, will benefit from the renewable and clean energy sources that they have developed.   Republicans don’t normally give back to Democratic states.
  4. Can one imagine higher fuel costs not going to the Koch family.

About Dennis SILVERMAN

I am a retired Professor of Physics and Astronomy at U C Irvine. For a decade I have been active in learning about energy and the environment, and in lecturing and attending classes at the Osher Lifelong Learning Institute (OLLI) at UC Irvine.
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