Following are two questions for James Hansen and Grist readers, relating to Dr. Hansen’s tax-and-dividend proposal in his recent policy recommendations to Obama:
1. Would it not be advantageous to use dividends to give consumers an equity stake and interest in decarbonization?
This could be achieved by investing carbon tax revenue in renewable energy and clean technologies in exchange for equity, and distributing equity shares to the public on an equitable per-capita basis. The shares would yield dividends that increase — not decrease — as carbon is phased out.
2. Is tax-and-dividend fundamentally incompatible with cap-and-trade?
Many of the ills of cap-and-trade (“special interests, lobbyists, …”) are associated with free allocation, but allowance auctioning (which Obama favors) would be similar to a tax in terms of revenue generation and potential for consumer dividends. Moreover, an auction with a price floor would be equivalent to a carbon tax as long as there are sufficiently many allowances to satisfy market demand at the price threshold. (The price would only increase if the tax incentive is insufficient to achieve the cap.) A recognition of the commonality between carbon taxes and cap-and-trade could help overcome political barriers to action on climate change.