How Climate Income works

A Climate Income (carbon fee and dividend) is a quick way to cut greenhouse gas emissions (33 percent within ten years), it’s cheap, and it protects the pockets of UK residents on low and middle incomes.

How does it cut greenhouse gas emissions?
In a nutshell, it makes burning fossil fuels more expensive.
This means consumers will switch to cheaper (ie cleaner) alternatives, and it will be uneconomical for business to burn fossil fuels.
We’ve already seen the effect of a rising price – the development of electric cars and renewable energy is becoming the safer investment.
But – and this is a big but – people with vulnerable finances will be protected from the rising costs while the UK switches to clean energy, and government will not come to rely on the revenue (as they have with smoking, alcohol and fuel duty).

Who pays the fee?
The fee is a charge for greenhouse gas pollution.
But it is different to VAT and petrol duty – the public is not charged.
The businesses who extract or import fossil fuels would be charged through a new law, according to the amount they burn.
The fee is set per tonne of greenhouse gases released from burning fossil fuels.

Who collects the money?
The Government (HMRC) or a not-for-profit organisation.

Climate Income protects people on low and middle income
The dividend payment is vital to protect the pockets of UK people on low and middle incomes while humankind moves away from burning fossil fuels.
The fee on fossil fuels must be high enough to make this work.
But people must be able to afford heating and transport while we wait for clean energy to become the norm. And it must be popular with the voting public to survive successive governments.

How Climate Income is distributed
All resident adults in the UK receive a payment, children half.
The payments are equal, regardless of household income or carbon footprint.
It could be through an income tax rebate, as a benefit payment or through an app.
A separate payout is important, labelled ‘climate income’ or ‘climate dividend’ to help with its popularity. The public is also reminded that this extra money is to fight climate change and to help them budget for rising costs or investment into clean energy tech or energy saving projects.

Fossil fuel-burning businesses will be charged through a government law
We’d prefer it as a new law or an amendment to the existing one – such as the 2008 Climate Change Act – so that it has staying power through successful governments.
This is why Citizens’ Climate Lobby works to influence our MPs as our elected representatives in government.

Clever businesses will switch to cheaper, clean energy
Although the public won’t be charged directly (like petrol duty or VAT), we expect business to behave as usual – ie they will raise their prices to cover their higher costs.
So burning fossil fuels will become more expensive, but we don’t expect this to change behaviour by itself – clever businesses will stop using fossil fuels in their production because clean energy will be the cheaper option. And innovative technology will be encouraged because, again, it will be cheaper.
So better and more affordable clean energy options will be created and people will want to switch to the cheaper option.

Why just doing our bit isn’t enough
We often don’t have the choice to each do our bit! Usually the worst environmental option is the cheapest. Leaving it to personal choice and voluntary business agreements has not stopped the terrifying rise in global emission levels.
By creating change at a national level – through the UK government and cross-party cooperation – a climate income will help create a world where there are only good choices.
And the success and example of the UK can help lead the rest of the world in fixing climate change.

A Climate Income will stop the UK exporting emissions
This is why fossil fuels are charged at source. Unless there is an equivalent carbon fee at the country of origin, fossil fuels – and fossil fuel intensive goods – will be charged.
There’s no place for emissions to hide.
It will not be cheaper to make a product outside of the UK and re-import.
This also encourages other countries to have a carbon fee – they would want to keep the revenue from their own fee (or give it back as a dividend to their own people) rather than give this money to the UK.

A Climate Income would protect UK export business
The UK has to protect its economy or we will swap climate change problems for instability.
So when businesses export their goods, the fee will be refunded.

A Climate Income would help save lives
Burning fewer fossil fuels will clean up our city centre air, and save many of the 64,000 lives per year usually lost to air pollution, such as heart and artery disease, asthma, cancer, diabetes and chronic lung disease.

Is Climate Income the only solution we need to cut GHGs?
It’s a very powerful tool in a suit of carrots and sticks. It won’t be enough by itself, but it will certainly cut emissions by a big chunk whilst costing little to do so.

Here is an explanation of a carbon fee and dividend from The Guardian. Carbon Fee and Dividend is the name we use with government legislators.

And CCL UK founders wrote this.

For more analysis and evidence, read this.