Fee and dividend

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A coal power plant in Germany. Fee and dividend will make fossil fuels - coal, oil, and gas - less competitive as fuel than other options.

Fee and dividend is a revenue-neutral mechanism designed to impose a progressive fee on carbon emissions and return the fee to the public, which has been proposed as an alternative method of reduction in fossil fuel use to cap and trade or carbon tax mechanisms. This mechanism is designed to maintain economic function while encouraging transition to a sustainable energy economy while simultaneously reducing CO2 emissions.


The basic proposed structure is:

  1. A fee is charged at the point of origin or point of import on greenhouse gas emitting energy (oil, natural gas and coal).
  2. The fee is progressively increased.
  3. The fee is returned to households equitably and in full.

In order to maximize effectiveness, the amount of the fee would be regulated based on the scientific assessments from both the economic science and the climate science in order to balance the amount of the fee and speed of fee progression.


Country Region Year started Price of carbon Price of CO2 Per year progression
Canada British Columbia 2008[1] $10 per ton unlisted $5 per year

Political support[edit]

Fee and dividend is the main policy approach advocated by the Citizens Climate Lobby organization.[2]

The organization Citizens Climate Lobby, which advocates for such an approach, argues that a fee & dividend policy will be easier to adopt and adjust than more complicated mechanisms, thus enabling an economically sound transition policy that supports monetary economy needs, and the new energy economy, as required.[3] James Hansen, Director of the NASA Goddard Institute for Space Studies has been working on raising awareness on 'Fee & Dividend'[4] through his position at Columbia University,[5] and an open letter discussed in The Guardian.[6]

Inspired by the Fee and dividend structure Republican Congressman Bob Inglis introduced a H.R. 2380 on May 13, 2009 in the U.S. House of Representatives called the 'Raise Wages, Cut Carbon Act of 2009'.[7][8] Congressman Inglis considers energy infrastructure to be a national security issue and supports a variant of Fee and Dividend as the most reliable way to achieve energy security for America. Another bill partly inspired by the Fee and Dividend structure was introduced by Democratic Congressman John B. Larson called H.R. 1337[clarification needed] on March 5, 2009 “America’s Energy Security Trust Fund Act of 2009″.[9] Congressman Larson's bill would fund corporate subsidies.


The Climate Lobby queried sources in business and finance to collect criticisms. The criticisms include:[10]

  1. The “fee” will just cause companies to raise their fees on the public so there will be no net change in cost.
  2. The government will be taking a huge cut for “overhead” to distribute the dividends and maintain the apparatus.
  3. Climate Scientists should do climate science and economists should handle the economy.
  4. Since Cap & Trade is already on the table wouldn’t it be beneficial to just get it passed and then try to refine the policy or push Fee & dividend?
  5. Shouldn’t we concentrate on enabling new technologies and businesses to develop needed technology and methods to solve this problem by enabling market forces to drive solutions?
  6. Will the progressive fee affect costs in third world nations. Isn’t there a justice issue?
  7. Cap and Trade vs. Fee & Dividend. Isn’t any policy a good start and then we can refine it?


External links[edit]