Carbon Fee and Dividend

Yesterday I went to a mini seminar on “Carbon Fee and Dividend” here in Oslo, (known as “karbonavgift til fordeling” in Norway, or simply “KAF”). The timing of this seminar  was great for me as I have only just finished reading “Storms of my Grandchildren” by the American climate scientist and previous NASA employee James Hansen. Hansen has been a strong proponent of the fee and dividend for many years and is largely responsible for introducing the idea to the environmental movement. He devotes a chapter to it in “Storms of my Grandchildren”, a book I would certainly recommend to any of my readers.

A big part of feeling inspired about a greener future is examining solutions that can get us there so let’s look into Carbon Fee and Dividend.

The idea behind Carbon Fee and Dividend is very simple. As James Hansen says, “As long as fossil fuels appear to be the cheapest fuels out there, they will be continued to be burned.”

Therefore Carbon Fee and Dividend proposes a national tax on all fossil fuels at the point where they enter the national economy; the coal mine, the oil refinery or the shipping port. The collected tax is then redistributed equally to every citizen, directly into your bank account. The rate of the tax is increased incrementally each year until the day fossil fuels have been phased out and there is no longer any need for the tax.

The idea is revolutionary in its simplicity. It is transparent and easy to understand.

An obvious question is; why does the revenue need to be redistributed to all citizens? This is in order to make the tax fair. A rising tax on carbon will  inevitably lead to an increase in prices on products with a large carbon footprint and it is only fair that people, particularly on low incomes are compensated for this in the short term. Another obvious question is; what prevents people from just consuming exactly as they did before and accepting their refund in the form of the dividend? This is theoretically possible but very unlikely to happen in reality. It wouldn’t be long before people start to realise the considerable financial gains they can make by making greener choices. It will also make greener products much more competitive and the market will adjust itself accordingly with more investment and increased availability in greener products, and less in products requiring high CO2 emissions.

The tax is also progressive as people on higher incomes have a larger carbon footprint than people on lower incomes. It is estimated that around 60% of people (on the lower end of the income scale) will actually be better off with such a tax so it should have broad appeal amongst the electorate.

So win win right?

I am personally convinced by the idea but there were some really important questions about its implication raised by people invited to talk at the seminar. Representatives from four political parties and the largest union in Norway all gave their parties’ positions on the tax.

The representatives for SV (Socialist left), MDG (Green party) and V (Liberals) (often seen as the “green bloc” in Norway) were positive to the idea with certain provisos or alterations. The union representative and the representative for AP (Labour party) were much more sceptical. The current parties of government H (Conservatives) and Frp (Progress party) declined their invitation to the debate.

The main criticism of the fee and dividend was that it doesn’t allow for democratically controlled redirection of investment to necessary areas of the economy. It simply leaves the market to “take care of it”.  The union rep was particularly concerned that people in industries with a large carbon footprint who stand to lose jobs are not certain to be compensated with new jobs under fee and dividend. He also argued that certain industries like fishing and agriculture should have a larger “carbon budget” than other industries during the transition to a carbon neutral future as they will be a vital part of a future green economy.

These criticisms were recognised by the proponents of fee and dividend at the seminar. Their answer to them was that fee and dividend is not a solution on its own. There would still need to be mechanisms in place to ensure democratic, long term economic planning for a greener future. Nevertheless they argue, the phasing out of fossil fuels is simply impossible as long as fossil fuels remain the cheapest fuel.

Generally I found the seminar very inspiring. It was good to see people from the environmental movement  and political parties and unions getting together and having a constructive discussion about climate solutions. It shows that with the right kind of political pressure you can get politicians to listen and take you seriously. I appreciate that this is easier in some places than others. The election of Trump has been pretty devastating for lots of reasons, not least for the vulnerable situation minorities will find themselves in the US right now. It is also a big blow to the environment. There has already been movement on how to deal with this threat that I am going to look into in a future post so stay tuned.

There was a question and answer session at the end and I had a question burning on the tip of my tongue but didn’t pluck up the courage to ask it. I am going to E-mail one of the organisers of the seminar with the question and add it to this post when I get his answer. Not having the courage to speak is a frustrating thing that often happens to me at these kind of events and its something I’m sure I’m not alone in. This is a good theme for a future post I think.

As I have said I believe examining solutions is an important part of feeling inspired and getting active so I hope this has inspired you! I’m also really keen to hear your thoughts on Carbon Fee and Dividend so feel free to leave comments 🙂


For more information on Carbon Fee and Dividend click here.


4 thoughts on “Carbon Fee and Dividend

  1. Thanks for re-directing here Dave 😉 I’m keen to get as much discussion going on here as possible. Thank you also for the link. I hadn’t seen this before and it looks really interesting. You could in some ways compare it to Carbon Fee and Dividend. In Carbon Fee and Dividend you in a sense pay for the reductions you are unable to make to your carbon footprint in increased commodity prices. The main difference is that Carbon Fee and Dividend compensates and rewards you for greener choices. The carbon fund only “punishes” you financially for not making greener choices if you choose to opt into it, and there is the rub. We need in my opinion green initiatives with universal appeal. They need to appeal to both people who are currently less inclined or less financially able to make greener choices if we are to achieve the CO2 emission reductions we need. So I don’t think these kind of initiatives on their own will be enough, however I think they could be an important part of the solution and here is why.

    The really good thing about it it seems to me is the “interactive” element. It makes it easy to calculate your carbon footprint and to get info on and get involved in green initiatives like renewable energy. People getting involved and getting engaged is also essential to a transition to a greener future in my opinion. It also directs investment to necessary places in a more direct manner than Carbon Fee and Dividend does. It would be much more interesting to me if people who donate to the fund were able to take part in choosing how the money is spent, but I couldn’t see anywhere on the site that suggested that. A side note on offsetting too. We can’t simply offset our carbon emissions by planting trees. The climate situation is such that we need to both improve forestry carbon capture and drastically reduce carbon emissions if we are to stabilise our climate. The site seemed to include both of these things in its “offsetting” however so that is good.

    So to sum up. It looks like a great thing for people already inclined and financially able to get involved. I feel we need initiatives with more universal appeal however. We also need initiatives that allows people less well off to get involved in a more direct way and I will be writing about that in later posts. I recommend checking out “Urban farming” as an example if you are interested.

    It seems from your initial comment that we are probably largely in agreement here. Keen to hear more of your thoughts though!


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