Climate Income a.k.a. Carbon Fee and Dividend

What is Climate Income?

Climate Income (a.k.a. Carbon Fee and Dividend) is the policy proposal created by Citizens’ Climate Lobby (CCL) to internalize the costs of burning carbon-based fuels.  It is a national carbon price, with full revenue return and Carbon Border Adjustments Mechanisms (CBAMS).

Why Climate Income?

As long as fossil fuels remain artificially cheap and profitable, their use will rise. Correcting this market failure requires their price to account for their true social costs. To be effective, the carbon price must rise well above $100 tonne by 2030 and the burden of transitioning must not be put on households. That is why since 2010 we have advocated returning the revenues collected back to households.


Where has it been enacted?

Canada’s Greenhouse Pollution Pricing Act is a form of Climate Income but instead of Carbon Border Adjust Mechanisms (CBAMS), we have output based carbon pricing for heavy emitters. Currently, Austria has a Klimabonus, and Switzerland are versions Climate Income too. Note that Canada is exploring CBAMS with international partners.

Climate Action Makes Our Lives More Affordable

Taking action on the climate crisis will enhance the affordability of our lives.  The climate crisis has already inflicted a staggering cost of $16 million per hour in extreme weather damages over the past two decades. Climate Income policies as we have in Canada, further improves the affordability of climate action.


The Basics of Climate Income


Place a steadily rising fee on the CO2 content of fossil fuels.

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Give all of the revenue from the carbon fee back to households.

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CBAMS will discourage businesses from relocating.

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It's good for the climate, the economy AND reduces inequality.

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The policy proposal we began lobbying our MPs for in 2010 that has evolved:

A Solution: Climate Income

A Solution: Climate Income (English) pdf

Proposed Findings:

1. Causation: Scientific evidence indicates that greenhouse gas emissions, mostly from burning fossil fuels but also from other sources, are causing rising global temperatures.

2. Mitigation (Return to 350 ppm or Below): A return from the current concentration of over 400 parts per million (“ppm”) of carbon dioxide (“CO2”) in the atmosphere to 350 ppm CO2 or less by the end of this century is necessary to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted.

3. Endangerment: Further increases in global temperatures pose imminent and substantial dangers to human health, the natural environment, the economy, and national security. They also present an unacceptable risk of catastrophic impacts on human civilization.

4. Co-Benefits: The measures proposed in this legislation will also benefit the economy, human health, and the environment even without considering global climate disruption, as a result of reductions in non-greenhouse-gas pollutants.

5. Benefits of Carbon Fees: Predictably rising Carbon Fees on fossil fuels are the most economically efficient, transparent, and enforceable mechanism to drive a transition to a low-carbon economy. They give all businesses and individuals a powerful incentive to reduce their carbon footprints.

6. Equal Monthly Per-Person Climate Income Cheques: Equal monthly cheques (or “rebates”) from Carbon Fees paid to each Canadian household will equitably recycle revenue obtained from Carbon Fees.

Therefore, the following legislation is proposed:

1. Collection of Climate Income: Beginning April 1, 2018, Canada will impose a Carbon Fee on all fossil fuels (oil, coal, and natural gas) at their first point of sale. Yearly price increases shall continue until Canada’s total CO2 emissions have declined to 10% of the level of Canada’s CO2 emissions for the calendar year 1990.

2. Monitoring the Impact: Every year, the Ministry of Finance and the Ministry of the Environment with the assistance of the Parliamentary Budget Office will conduct studies on the impacts of the climate income policy on the economy, households and greenhouse gas emissions to determine whether an increase in the rate of annual increase of the Carbon Fee to greater than $15/tonne CO2 /year is required to achieve Canada’s short-term greenhouse gas reduction targets. In no case, however, shall the annual increase in the Carbon Fee be less than $10 until the target of 10% of calendar year 1990 emissions is reached.

3. Equal Per-Person Monthly Dividend Payments: The revenue collected from Carbon Fees shall be distributed as equal monthly per-person dividend payments to all Canadians (1/2 per child under 18 years old). These cheques will be mailed to Canadians where applicable. 

4. Carbon Border Adjustment Mechanism: In order to ensure that Canadian products can remain competitive, , Border Carbon Adjustment Mechanisms (CBAMs) shall be charged for goods entering Canada from countries without comparable Carbon Fees/Carbon Pricing. Carbon-Fee-Equivalent Rebates may also be used to reduce the price of exports to such countries. CBAMs must incorporate the UNFCCC principle of Common but Differentiated Responsibilities and Respective Capabilities.

5. Direct use of Fuel: The direct use of fossil fuel by a producer or importer shall be subject to the Carbon Fee in the same manner as if the fuel were sold.

6. Emissions from Non-Fossil Fuel Sources: The Ministry of Finance, in consultation with the Ministry of the Environment, will develop assessment procedures so that all readily measurable greenhouse gas emissions not arising from fossil fuel combustion (e.g., CO2 emissions associated with industrial processes; methane release; HFCs) will also become subject to the Carbon Fee, based on their CO2-equivalent greenhouse gas potential.

7. Phase-Out of Fossil Fuel Subsidies: All existing subsidies for fossil fuels, including tax credits, shall be phased out over the five years following enactment.

8. Moratorium on New or Expanded Coal-Fired Power Plants: Beginning on the date of enactment, there shall be no new coal-fired power plants permitted or constructed. There shall also be no expansion in capacity of any existing coal power plants.

9. Phase-Out of Unabated Gas-Powered Electricity: By 2035, Canada will phase out all unabated gas-powered electricity. All abatements of the gas-power using carbon capture and sequestration and offsets must be verifiable.

10. Seeking Treaties: The Government of Canada shall seek treaties with other countries that quickly spur on the adoption of programs similar to the ones provided for in this Act to reduce CO2 and other greenhouse gas emissions.

11. People-Centric Framework: consultations with the people of Canada as was done with the Canadian Pan-Canadian Framework on Clean Growth and Climate Change, as well as all human rights must be embedded into the ongoing development of this policy.