Q&A on the Baker-Shultz Carbon Dividend Plan with Catrina Rorke of the Climate Leadership Council

1. We’re used to talking about a carbon tax, but I expect fewer people have heard of a “carbon fee and dividend.” Explain a bit about how a “carbon fee” is different and how the Baker-Shultz Plan would price emissions?

The Climate Leadership Council’s carbon dividends plan is unique in that it unites both parties behind a lasting climate solution that would lower emissions, foster innovation, and help families get ahead. The Baker-Shultz Plan is organized around four pillars:

1. Charge fossil fuel companies a fee for their carbon emissions. This will cut U.S. carbon emissions in half by 2035 on its own.

2. Put all the net revenue from the carbon fee back into the pockets of the American people through quarterly dividend payments. For example, a family of four will receive about $2,000 a year.

3. Remove redundant carbon regulations so businesses can innovate the fuels and technologies of the future.

4. Charge a similar fee on foreign goods at the border, encouraging other countries to do their part while boosting the competitiveness of U.S. manufacturing

Catrina Rorke

2. Business leaders are really starting to support carbon pricing as a strategy to reduce emissions, including the Baker-Shultz Plan. Why do so many business leaders, including some fossil fuel companies, support the Baker-Shultz Plan?

Our Founding Members helped develop the carbon dividends plan because they want to be part of a meaningful, ambitious climate solution. Businesses support carbon dividends because it’s the fastest and most efficient way to reduce emissions – and 3,500 economists agree! A price on carbon would also spur demand for low-carbon and energy-efficient solutions. This would give American companies the market certainty they need to develop and deploy the next generation of clean technologies.

The alternative to a price is regulation. A regulatory-only approach would likely take years to implement, requires a piecemeal sector-by-sector approach, and would remove $190 billion per year in new investment from the domestic economy. While the carbon dividends plan can’t solve the climate problem alone, it should be the centerpiece of our domestic climate strategy.

Catrina Rorke

3. One really important and unique piece of the Baker-Shultz Plan is its focus on carbon emissions from goods made elsewhere, like China and India. What is the “carbon border adjustment” and how would that work?

A carbon fee is the only climate tool that can reach beyond our borders to compel emissions reductions in other countries. Under a border carbon adjustment, importers will face the same fee as domestic producers in the U.S. market. This leaves competitors in places like China and India a choice: lower emissions or lose a piece of the world’s largest market. American companies will have a distinct advantage against less efficient foreign competitors. Council research has found that the U.S. is 80% more carbon-efficient than the global average and 300% or more carbon efficient than our highest-emitting competitors, including China, India, and Russia.

Catrina Rorke

4. Another key piece of the Baker-Shultz plan is a monthly dividend to households from revenue generated by a carbon fee. How would the dividend compare with any increases in energy prices or goods caused by pricing carbon emissions? Who would likely benefit?

Even though large companies will be paying the carbon fee on their emissions, economists anticipate that at least a portion of the cost will be paid by Americans in higher energy and product prices. That’s why the Council pairs the carbon fee with a dividend – all of the net revenue collected from the carbon fee will go right back into the pockets of American families.

In the first year of the program, a family of four will take in about $2,000 in dividends. For the average household, that’s more than they’ll spend in higher energy or product prices. The vast majority of families – including the lowest-earning 80% of households, on average – would come out financially ahead with our plan. Simply put, most American families will be better off with the carbon dividends plan than without it – and that’s before accounting for the benefits of a cleaner environment and more stable climate.

Catrina Rorke

5. The Biden administration is now making the case for billions of dollars in investment for energy R&D and in energy infrastructure as part of its “American Jobs Plan.” Would it be a better idea to use the revenue from carbon emissions to pay for new investments rather than returned to households as a dividend?

The reason carbon dividends has support from all sides is that it gets all Americans involved in our clean-energy future. The vast majority of Americans will receive more in carbon dividends than they pay out in increased energy costs. This aligns, for the first time, the economic interests of ordinary Americans with climate progress, ensuring a lasting commitment to meet our long-term emissions reduction goals. Returning revenue from the carbon fee to households also helps ensure that lower-income families do not bear the brunt of the costs as we transition to a clean-energy future.

Catrina Rorke

6. Lastly, Utah is a big energy state, with a diverse mix of clean energy, oil, gas, and power generating facilities. Some are likely to be worried that we will be put at a disadvantage by pricing carbon emissions. What would you say to them?

Carbon-intensive power sources, like coal, are already in decline. Meaningfully addressing climate change will require that the economy continue to shift toward lower-carbon sources of power like natural gas and renewables. Addressing the costs that this economic shift will have on communities and families must be addressed in any comprehensive climate policy.

At the same time, carbon dividends will also increase investment in American communities. Research from the Council finds that the carbon dividends plan will drive an additional $1.4 trillion (with a “T”!) in new investment across the economy and create 1.6 million new jobs. And carbon dividends won’t pick winners and losers – a carbon price encourages every industry and community to innovate and find their own best way toward a low-carbon future. This will unlock investment all across the country and create new opportunities for American prosperity.

Catrina Rorke

To see a recording of the discussion about climate action and the Baker-Shultz Plan, please email josh@utahcleanenergy.org.