Carbon Fee and Dividend Calculator FAQ
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The CFD Calculator allows anyone in the U.S. to estimate the first-year financial impact of the Carbon Fee & Dividend on their personal budget. The calculation is based on where you live, your family size, and your self-reported income and expenditures on things like gasoline, electricity and natural gas. It is an estimate — your actual results may vary depending on your actual consumption patterns.
The CFD Calculator generates three numbers in order to give you a personalized estimate.
- The Carbon Fee: Producers of fossil fuels will pay an initial cost of $15 per metric ton of CO2that would result when the fuels are burned. Those fees will go into a Carbon Fund that will then be divided up among American households (see below). The fee will impact you because companies will pass along higher prices for things you consume — gasoline, electricity, food, clothing etc. — that have a carbon footprint. In order to estimate how much you’ll pay, we first ask you to answer 7 questions: number of adults, number of children, household income, zip code, housing type, number of vehicles, and heating fuel type. The calculator estimates your costs based on the typical energy habits of a household with those characteristics. In the next step, you can adjust 3 of these costs — gasoline, electricity, and heating expenses — to match your average monthly cost for each. If you don’t know these costs, don’t worry! You can just go with the averages generated by the model or come back with those numbers later to make the results more accurate.
- The Dividend: This is a monthly payment that will be sent to all American households. Think of it as your share of the payback for climate damage caused by fossil fuels. We calculate this by estimating the total amount that fossil fuel producers pay into the Carbon Fund, and then divide it up among the U.S. population, with all adults getting an equal share and the first two children in each household getting a half-share. Your household size determines your share, and your income helps estimate your income tax, so the Calculator can determine your estimated after-tax monthly dividend.
- The Net Benefit: In the final screen, the net benefit number that you see is your estimated household dividend less your estimated household costs due to the carbon fee.
Entering those direct energy costs based on your real-world experience will make your results more accurate. For electricity and heating, add up your monthly utility bills for the previous year and divide by 12. It’s important to add up the entire year to account for seasonal changes, which can be very substantial. For gasoline, there are various ways to estimate (e.g., miles driven x average pump price ÷ mpg; or just add up your receipts for, say, 2 months and then divide by 2). These calculations don’t have to be precise, but the closer you come to your actual costs, the more accurate the estimate of your benefit.
Indirect carbon costs, referring to CO2 that is emitted during the production of other goods and services like food, electronics, clothing, etc., is included in the calculations. These costs account for 50 to 60 percent of carbon costs for most households. Direct carbon costs, on the other hand, refer to money you spend on energy you use directly — gasoline, electricity, and natural gas or other heating fuel. These account for 40 to 50 percent of carbon costs.
If you have accurately entered your gasoline, electricity, and heating bill costs, the result has a margin of error equal to about ±$17 per month. For example, if the CFD Calculator estimates a net benefit of $50 per month, there is a 90 percent chance your actual outcome will be a net benefit in the range of $33 to $67 per month. Using the model-generated averages for your costs, the results would have a larger uncertainty, in the range of ±$24 per month.
The data sources are the same as those used in the Household Impact Study (HIS), and the Calculator was designed in collaboration with the author of that study. Although the HIS was based on 48 household data types that affect carbon footprint, the Calculator asks users for 7 inputs that are easy to recall and demonstrate good ability to predict a household’s carbon footprint. Federal databases were used to compute total carbon fees collected, population of adults and children, energy costs and carbon intensity by zip code, typical heating costs, etc. Incomes have been inflation-adjusted to the year 2017.
If you know your direct energy costs like gasoline, electricity, and home heating for the previous year, you can fine-tune the results for those costs using ‘sliders’ provided in the tool. If, for example, you don’t drive much, or your vehicles are more fuel-efficient than average, your carbon cost will be lower than an average household with your characteristics. There are other lifestyle factors like diet, for example, that the Calculator estimates through statistical data, but does not provide a way for you to adjust for those specific details.
Yes, the Dividend shown in the results is the dollar amount after federal income taxes have been taken out, assuming federal tax rates for a typical household described by the user’s inputs. State and local taxes, however, are not included in the calculation.
9. What about ‘shared’ households where more than one person or family group live together but receive separate Dividends?
The carbon footprint calculations used in the Calculator are based on federal data sources that define a ‘household’ as everyone living under the same roof. However, Dividends will be paid to each tax-filing individual/couple plus dependents, if any — which we can call a ‘sub-household’. Thus, while the Calculator can accurately estimate the aggregate Carbon Cost for a shared household, accounting for all the various efficiencies gained by shared housing, it may overestimate the income tax paid on each sub-household’s Dividend, and thereby underestimate their Net Benefits. The Calculator may also under-count the number of Dividend-eligible children in some shared households. There is also no way for the Calculator to know how household energy expenses (and associated carbon costs) are divided up among the sub-households.
To improve accuracy of the Calculator results for shared households, follow these steps:
- Run the Calculator for the aggregate household including all residents and all vehicles, and using actual monthly gasoline and utility costs if possible. Record the household ‘Monthly cost due to carbon fee’.
- Make some determination of how household costs for gasoline and utilities should be divided up among the sub-households, and split up the ‘Monthly cost due to carbon fee’ from step 1 accordingly among them, so you have a monthly carbon cost estimate for each sub-household.
- Run the Calculator again for each sub-household separately, using their income and number of vehicles. Record the ‘Monthly after-tax household Dividend’ for each one.
- For each sub-household, subtract the monthly carbon cost determined in Step 2 from the Dividend determined in Step 3. That will give you the Net Benefit for each sub-household.
No. After the first year, changes in key factors such as household income, tax laws, vehicle efficiency, carbon intensity of grid power, etc. are too numerous and too large to predict with enough accuracy. As a rule, the household Dividend and household carbon costs will go up together in proportion to the increase in the Carbon Fee. Over time, both of these growth rates will slow down and eventually fall to a very low level as our energy systems are decarbonized. In the meantime, any given household may find ways to reduce its carbon footprint to improve their bottom line.
The CFD Calculator assumes a carbon cost for air travel that is typical for a household with the user’s inputs. It’s worth noting that although air travel is carbon-intensive, it only accounts for about 2 percent of total U.S. greenhouse gas emissions. Most of our carbon footprint is still found in everyday energy usage and embedded in the products and services we buy.
12. What about energy-consuming items that are not covered in the query, like a second home or a boat?
These can be accounted for when adjusting the direct energy cost ‘sliders’ for gasoline, electricity, and heating. Simply include those costs in the annual totals used to calculate a realistic monthly average.
If you have your own solar array (or wind turbine), do not include any lease or financing costs for that equipment in your electric bill. When adjusting the ‘average monthly electric bill’ slider, only include the cost for the power you buy from the utility. Remember that the Calculator knows how ‘green’ the utilities are in your area, based on your zip code, but has no way of knowing how much electricity you generate yourself.
Accurately accounting for this would require a little extra work on your part. If you can obtain a carbon footprint report from your power supplier and a comparable report from the major electric utility in your area, you can calculate a ratio of the green power to the not-so-green power. Let’s say your renewable power supplier’s carbon footprint is 200 g CO2 per kilowatt-hour, and your conventional utility’s carbon footprint is 800 g CO2 per kilowatt-hour. The ratio is then 200/800 = 0.25. You can multiply your average monthly electric bill by that ratio and then adjust the electricity slider accordingly. This will improve the accuracy of your carbon costs prediction.
The drop-down box for ‘What kind of fuel is used most to heat your home?’ includes Electricity as one of the choices. If you select that for your household, you will see in the next step that there is no slider for heating fuel — it’s contained in your electric bill.
The CFD Calculator does not have a specific input for this factor, but information is available to estimate it (see table in next FAQ). For example, compared to beef, the CO2 cost of fruits and vegetables is about 30 percent lower. About 10 percent of the average family’s Carbon Fee cost is associated with food, so if meat made up half of your diet, completely eliminating it might reduce your total carbon cost by 1 to 2 percent, depending on the specific changes you make. Of course, as the Carbon Fee increases, the dollar savings for eating less meat would increase proportionately.
Note also that although the Carbon Fee and Dividend will apply to all GHG emissions, for technical reasons the model behind the CFD Calculator only applies to CO2.
Those are additional lifestyle characteristics, such as air travel and diet, that can also affect our carbon footprints. Their impacts are estimated in the carbon cost calculations based on the 7 main inputs (number of adults, number of children, income, zip code, housing type, vehicles, and heating fuel), but attempting to fine-tune them further would be an onerous task – for example, requiring a user to track down receipts for every food or clothing purchase made during the year!
If you want to get a general idea how reducing different kinds of expenditures would impact your carbon costs, you can use the table below to do so. Here is an example of how to calculate that:
Reducing one’s air travel expenditure by $100 would, on average, reduce that person’s cost from the Carbon Fee by about $1.66 — that is, $100 × Carbon Intensity (1.104) × Carbon Fee ($15) ÷ 1000 kg per metric ton.
|Expenditure category||Carbon intensity,|
kg CO2 per dollar
|Expenditure category||Carbon Intensity,|
kg CO2 per dollar
|Laundry & cleaning supplies||0.464||Major appliances||0.255|
|Pork||0.405||Fees & admissions||0.247|
|Dairy||0.360||Vehicle maintenance & repair||0.241|
|Poultry & fish||0.359||Alcoholic beverages||0.238|
|Other food at home||0.344||Food away from home||0.220|
|Furniture||0.333||Small appliances & housewares||0.219|
|Other entertainment misc.||0.327||Personal services||0.216|
|Household textiles||0.320||TV, radio, & sound equipment||0.208|
|Nonalcoholic beverages||0.309||Vehicle rental, licenses, etc.||0.203|
|Cereals & baked goods||0.307||Tobacco products||0.138|
|Fruits & vegetables||0.294||Telephone services||0.135|
|Misc. household equipment||0.293||Personal insurance & pensions||0.058|
|Pets, toys, playground equipment||0.285||Home insurance||0.044|
|New car & truck net outlay||0.280|
18. Help! My 'net benefit' is negative! Can the calculator help me find ways to lower my carbon footprint?
Possibly, to the extent you have control over the inputs. Can you move to a zip code with a milder climate or a greener electric grid, or change the size of your household? Probably not, but if you are already planning to move or expecting a new arrival, the Calculator can help you predict how those changes will affect your bottom line. Other inputs like housing type or number of vehicles are there mainly to make the initial estimates of your direct energy costs, which can then be overridden by adjusting the sliders. That’s where you have much more control. For example, if you want to do the number-crunching, you can see how doubling your car’s miles per gallon, installing a high-efficiency furnace, or installing solar panels to generate some percentage of your electricity will affect your Net Benefit.
Probably not. One of the biggest takeaways from the original study and this tool should be that we’re not talking about big impacts on most consumers. In fact, most U.S. residents will benefit. Households whose dividends fall short of carbon costs will tend to be more concentrated among higher-income Americans who consume a lot more fossil energy than the average. Even in those cases, that shortfall will usually be less than 0.2 percent of household income.
Remember, for just about everything you buy, a business owned it first. So, everything you buy has more than one decision-maker. While consumers can’t go out of business, businesses can. Because businesses buy and spend a lot more than most consumers, even these small price changes can make a big difference. Businesses whose competitors decarbonize their supply chain had better decarbonize their own, or they will go out of business. The businesses most successful in decarbonizing smartly will make more money. Consumers will be left with more carbon-virtuous products to choose from, and the products with the least carbon in them will be the least expensive.