Give all of the revenue from the carbon fee back to households. 100% of the revenue from the carbon fee is held in a Carbon Fees Trust fund and returned directly to households as a monthly dividend. The vast majority of households will receive more than they will pay for increased energy costs. This feature will inject billions into the economy, protect family budgets, free households to make independent choices about their energy usage, spur innovation and build aggregate demand for low-carbon products at the consumer level.
Place a steadily rising fee on carbon-based fuels. To internalize the social cost of carbon apply an initial fee of $15/tonne on the CO2 content of fossil fuels, escalating $10/tonne/year, imposed upstream at their point of extraction and collected upon entry into the economy. Accounting for the true cost of carbon-based fuels not only creates a level-playing field for all sources of energy, but also informs consumers of the true cost-comparison of various fuels when making purchase decisions.
Border adjustments will discourage businesses from relocating and encourage other nations.Import fees on products imported from countries without a carbon fee, along with rebates to Canadian industries exporting to those countries, will discourage businesses from relocating where they can emit more CO2 and motivate other countries to adopt similar carbon pricing policies. Existing tax and trade systems avoid complex new institutional arrangements.Firms seeking to escape higher energy costs will be discouraged from relocating to non-compliant nations (“leakage”), as their products will be subject to import fees.
It's good for the economy and even better for the climate. A US study from REMI shows that carbon fee-and-dividend will reduce CO2 emissions 50% below 1990 levels in 20 years and that recycling the revenue creates an economic stimulus that adds 2.8 million jobs to the economy. A report from Canada’s Ecofiscal Commission, “The way forward” analyzed where Canada would be in 2020 if regulation or carbon pricing were used to manage carbon pollution. The carbon pricing model they used was revenue-neutral. In this model, Canada’s gross domestic product (GDP) in 2020 is 3.7% better under carbon pricing than it is under a regulatory approach. A structured rising price on GHG emissions will focus business planning on optimizing investment priorities to thrive in a carbon-constrained world. Carbon Fee and Dividend does not increase the size of government, require new bureaucracies or directly increase government revenues. The dividend increases real disposable income, protects personal spending decisions and will recruit widespread, sustained engagement. Carbon Fee and Dividend is elegant in its simplicity, transparent it its accessibility to public scrutiny and clear in its signals and benefits. Compared to cap and trade, it will generate a lot less red tape for businesses and government.