Citizens’ Climate Lobby has advocated for Carbon Fee and Dividend for nearly a decade. In 2019, members of the House introduced the bipartisan Energy Innovation and Carbon Dividend Act, which embodies the fee-and-dividend approach we support. We are now advocating for this specific bill.

Financial Impact of the Energy Innovation and Carbon Dividend Act on U.S. Households

In August 2020, Citizens’ Climate Education (CCE) and Citizens’ Climate Lobby (CCL) released a working paper that projects how U.S. households will fare financially under the Energy Innovation and Carbon Dividend Act of 2019 (H.R.763). This document, entitled “The Impact of a Carbon Fee and Dividend Policy on the Finances of U.S. Households,” is a follow-up to a 2016 study that had preceded the drafting of legislation in 2018.

H.R.763 imposes a fossil fuel carbon fee at $15/metric ton of CO2-equivalent, and then distributes all the net proceeds to eligible U.S. residents on a per-capita basis as monthly Carbon Dividends. Adults receive full shares and children receive half-shares. Because of enduring interest from members of Congress in how their constituents would fare under the policy, CCE and CCL commissioned independent researcher Kevin Ummel to conduct this analysis. Mr. Ummel, a Research Affiliate at the University of Pennsylvania and President of Greenspace Analytics, had previously authored the 2016 study.

The new study aligns with the legislative language of H.R.763 and uses the most recent available economic and emissions data. It also incorporates methodological improvements, such as using consumption as a benchmark for household economic status and adjusting the assumed pass-through of carbon fee costs to households, based on recent research.

Study Highlights:

61 percent of households and 68 percent of individuals in the U.S. end up receiving more than enough in monthly carbon dividends to offset their increased costs. Figure 1 shows how those net benefits break down across quintiles (each quintile = 1/5 of the U.S. population) ranked by household spending (consumption).

The reason the policy favors poorer households is demonstrated in Figure 2. Wealthier households (Quintile 5) have much higher carbon footprints. Thus, the policy places the financial burden upon those who contribute the most emissions, inherently relieving the most economically vulnerable households from bearing the burden for decarbonizing the economy.

Figure 2 also shows that carbon dividends will exceed costs for the bottom three quintiles, with the fourth quintile roughly breaking even. Note that these carbon costs are determined by behavior, regardless of income. In the aggregate, those with higher incomes typically consume much more, but nothing in the policy prevents a household from making consumer choices that will reduce their pollution-related costs, if they are motivated to do so.

The study also illustrates results for other demographic groupings.

Figure 3 shows how the net benefits work out according to race/ethnicity. Families of color experience, on average, more financial gains under this plan as a result of lower household spending (associated with lower carbon footprint), larger families (lower emissions per capita), and/or other community factors ( e.g. , more use of public transportation).

Figure 4 shows the results according to community type (rural vs. suburban vs. urban). Across the country, there are few differences in economic outcomes between rural and urban communities. In specific districts, the results will vary based on the community composition ( e.g. , a district that is predominantly urban or predominantly rural may show larger disparities due to limited data on households that fall into a different category).