Carbon Dividends Analysis

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There are many environmental issues that face all of humankind and require an early solution. Most of them are associated with the consumption of natural resources that are fossil resources such as coal and oil. Their unlimited use endangers humanity’s continued existence and directly harms the environment, polluting it with waste and leading to such effects as global warming (World Meteorological Organization, 2018). This paper’s central thesis is that a so-called carbon tax can help address environmental and other concerns, allowing for better resource use. Despite all attempts to design a new energy source to change the situation, global warming is observed worldwide due to the emission of greenhouse gases, which needs to be regulated. Thus, there is a need to create a global, at least on a national scale, system that would help address the above problems. A theoretical investigation of the environmental and political situation is needed to analyze whether a carbon tax can help. This study will be supported by arguments and evidence from both the creator of this method, Boyce, J.K., and other researchers, as well as a government report.

The importance and necessity of taking any measures to correct the current ecological situation are apparent. Due to the industrial revolution and the active use of resources, humanity drastically influenced the weather. The rise in temperature around the world was part of the reason why the 2015 Paris Agreement was established. Its purpose is to regulate measures to reduce carbon dioxide in the atmosphere and curb global temperature rise (Boyce, 2018). However, this particular document does not directly regulate the current situation, which makes it necessary to develop a specialized system.

The essence of the problem lies in the active use of natural resources such as oil and coal, which, when burned, emit carbon dioxide. In the chaotic use of these fuels, gases are released into the atmosphere, leading to global warming. The presence of global warming is confirmed by the reports of the intergovernmental group of experts on climate change, thereby destroying the doubts about the existence of this phenomenon (World Meteorological Organization, 2018). The problem has two components: uncontrolled waste of limited resources and the ensuing environmental impact. The basis of this problem is human nature, as well as the availability and gratuitousness of natural resources. If there is some free source, people tend to use it unwisely and illiterately, not considering its limitations and the fact that this resource will end sooner or later (TEDx Talks, 2013). Such attitudes and policies often lead to overuse, which jeopardizes the very existence of a source. Although there is an active development of alternative energy sources, there is no opportunity to abandon fossil resources. Therefore, it is necessary to somehow regulate their current use on a global scale.

The carbon tax is explicitly designed to address the problem by imposing a fee for using this accorded resource. For the consumer, the system consists of two main components. The introduction of a general tax on consumption and carbon dioxide emissions from cars, electricity, and other related resources is proposed (Boyce, 2019). Thus, each resident is burdened with a particular additional payment following their level of consumption. An essential point in this system is the redistribution of the received funds back to the residents (Boyce, 2019). Since these dividends are calculated upon all taxes collected, each person receives a fixed amount of money. In practice, this means that dividend payments will be much higher for many members of the lower and middle social class than the tax they pay.

Undoubtedly, most ordinary residents will approve of this idea based on the mere prospect of earning additional income. Still, it should be noted what such a solution brings to the global fuel consumption system. First, this system is based on a rethought understanding of the concept of a country’s natural resources. To implement the approach, the planet Earth is presented as a universal wealth to which everyone has a right (TEDx Talks, 2013). However, this right is not related to the need or desire to hang a price tag on the Earth and, in any way, sell its parts.

This concept means that all Earth inhabitants should have an equal right to use the resources and receive income. The approach is aimed at social equality since, at the moment, citizens are not connected with the income that the state receives from the use and extraction of natural resources. The exception is Alaska and its Permanent Fund, which manages oil profits in the region and redistributes them in the form of dividends to all residents of the state (Boyce, 2019). The basic idea of a carbon tax is similar to that of the Permanent Fund and extends it to a broader group of resources.

From an economic point of view, imposing such a charge on people would mean a gradual decrease in the consumption of sources associated with carbon dioxide emissions. The more a person drives a car that runs on gasoline, receives electricity from stations that run on carbon, the more tax will be charged. This approach naturally forces people to seek renewable energy alternatives (Boyce, 2019). At the moment, the problem is that such sources are much less competitive in comparison with standard and familiar carbon. The introduction of an appropriate tax will help stabilize this situation and stimulate the development of alternative energy. Experts agree that this approach is the most productive and cost-effective for developing the economy and curbing atmospheric emissions (Fried et al., 2019). Besides, a similar method can be applied in various economic areas and does not directly depend on other state measures, working with them together.

Thus, when using this approach, there is a natural regulation of carbon consumption. Due to limiting carbon sources, the development and diffusion of alternative energy sources will naturally make them cheaper. People tend to save more, so if they can spend less money switching to an alternative energy source, they are likely to do so (Boyce, 2018). Thus, air emissions will be reduced since no company will burn additional fuel than the established demand. At the same time, the market will be stimulated to develop cheaper and more affordable alternatives. Finally, one of the significant advantages of this method is the approximation of social equality between different social groups due to the state’s availability of financial assistance.

The primary, fundamental idea of this method is the equal distribution of the accumulated resources among all residents. However, taxes will be collected on an expenditure basis, which means higher charges for society’s wealthier segment (Boyce, 2019). On the other hand, it seems that the extra tax will be an unbearable burden for the poorest households. However, it is necessary to understand that these citizens will receive dividends that are many times bigger than the new tax. Thus, the lower and middle class will not incur any spending, either remaining in a neutral position or even receiving additional income from the excessive consumption of carbon by other people. Reallocating the money raised to pay dividends helps make these policies progressive, efficient, and meet the vast majority (Fremstad & Paul, 2019). At the same time, studies show that such measures will also effectively reduce emissions, thus being positive from all points of view.

Naturally, there are several alternatives to the carbon tax method, mainly related to collecting funds. First, the problem of limiting atmospheric emissions can be viewed in two ways: by imposing a tax or by setting a cap (TEDx Talks, 2013). These systems address the existing problem from two different sides, but they are almost equal in their effect. Establishing a limit aims to allow only a restricted amount of carbon into the economy, but its structure will regulate the price. The tax sets the price and enables the system to control emissions. Since this is the ultimate goal, most of the researchers follow this methodology.

The funds collected through taxes can be distributed in three directions. The simplest option is to redirect these reserves to companies, mining, or allocating resources (TEDx Talks, 2013). However, this approach assumes that the funds raised will go to the company’s internal needs and may even go abroad, which is unacceptable when using national resources. The second method involves collecting money by the state to focus it on the desired directions (TEDx Talks, 2013). The funds raised are added to the country’s budget, after which they can be spent on any critical areas. This method presupposes a relatively high level of citizens’ trust in their government since they will additionally sponsor the state.

Finally, the last option includes the distribution of the collected funds in the form of dividends. However, there are also several approaches related to the process and the amount of money returned. The method of double dividends and dividends with one-time discounts stand out most strongly along with those considered earlier. Nevertheless, according to experts, they cannot withstand any competition with a carbon tax (Fremstad & Paul, 2019). The first approach does not provide sufficient protection for citizens’ purchasing power, taking more than it returns (Fremstad & Paul, 2019). Another method focuses more on economic rather than environmental benefits, generating a one-time income (Fried et al., 2019). Although such an approach would be more beneficial for citizens, it shows much lower results in reducing air pollution in the future, extending the existing problem for several other generations.

Thus, a carbon tax is currently the most optimal way out of the current environmental situation. This method has a set of positive qualities that are manifested both at the economic and social levels. With such an approach, natural regulation of the number of consumed resources can be achieved, stimulate the development of alternative energy sources, and ensure social protection of the poor. Naturally, such a policy will not help solve all the existing problems, and the issue of climate disruption, emissions into the atmosphere, and global warming will remain relevant. However, the actions described above will give the world enough time to find a clean energy source that does not pollute the environment. With all the other benefits, a carbon tax is an effective way to reduce emissions and limit fossil resource consumption.

References

Boyce, J. K. (2018). Carbon pricing: Effectiveness and equity. Ecological Economics, 150, 52–61. Web.

Boyce, J. K. (2019). The case for carbon dividends. John Wiley & Sons.

Fremstad, A., & Paul, M. (2019). The impact of a carbon tax on inequality. Ecological Economics, 163, 88-97. Web.

Fried, S., Novan, K., & Peterman, W. (2019). The green dividend dilemma: Carbon dividends versus double-dividends. FED Notes. Web.

TEDx Talks. (2013). Unlocking our climate wealth: James Boyce at TEDxTraverseCity [Video]. YouTube. Web.

World Meteorological Organization (2018). Global warming of 1.5° C. Web.

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Carbon Dividends Analysis

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