Let’s pay every American to reduce emissions

This is an example of a “feebate” system: Individuals pay fees according to their use of a shared resource and receive rebates by virtue of its common ownership. The concept can be illustrated by means of an analogy.

Suppose that 1,000 people work in an office building whose parking lot has only 300 spaces. If everyone thought they could park for free, the result would be chronic excess demand and congestion. To avert this outcome, a parking fee is charged that limits demand to fit the lot’s capacity. Every month the money collected in parking fees is distributed as equal rebates to everyone who works in the building. Those who take public transit or bicycle to work come out ahead: They pay little or nothing and still get their share of the revenue. Those who carpool to work more or less break even. And those who commute every day in a single-occupancy vehicle pay more into the pot than they get back.

Carbon dividends apply the same idea to parking fossil carbon in the atmosphere. Everyone who consumes less-than-average amounts of carbon comes out ahead, receiving more in dividends than they pay in higher prices. This includes the vast majority of low-income households, since they consume less-than-average amounts of just about everything, including fossil fuels. Most middle-class households break even or come out a bit ahead. Upper-income households, especially the “one-percenters” with outsized carbon footprints from lifestyles that include larger homes and more jet travel, pay more in higher prices than they receive in dividends, but they can afford it. And of course, everyone benefits from cleaner air and a more stable climate.