Low-Income Households Laser Talk

Question: What will a carbon fee policy mean for low-income households?

Answer: Under the Energy Innovation and Carbon Dividend Act, [1] a majority of U.S. households will end up with more money in their pockets, and low-income households typically benefit the most. [2,3,4]

Why is this? The reason is simply that low-income households typically have lower carbon footprints. Americans in the wealthiest 20 percent of the population spend 2.6 times as much on fossil energy as the least wealthy 20 percent, and thus would typically end up paying over two and a half times as many dollars into the dividend pool. With that money then distributed back to households equally as Carbon Dividends, without regard to wealth or energy use, low-income Americans will come out ahead 96 percent of the time, simply because they consume far less energy than the wealthy. [6]

Moreover, the 2014 analysis by REMI revealed that a carbon fee and dividend policy like H.R.763 would also increase jobs, and the strongest job creation would be in occupations typically filled by low- to middle-income workers. [7]

The Energy Innovation and Carbon Dividend Act will leave low-income households better off financially and more likely to have a job, and it will do this without any costly and complicated means-testing, income group targeting, or income-based subsidization.

  1. H.R.763 The Energy Innovation and Carbon Dividend Act of 2019. Congress.gov (24 Jan 2019).
  2. Williams, R.C., et al. “The Initial Incidence of a Carbon Tax across Income Groups.” Resources for the Future (Aug 2014).
  3. Komanoff, C. “The climate solution that boosts income for over 60% of Americans – the ones who most need it.” Carbon Tax Center (15 Sep 2017).
  4. Fresmstad, A. and M. Paul. “The Impact of a Carbon Tax on Inequality.” Ecological Economics 163, 88-97 (Sep 2019).
  5. Boyce, J.K. The Case for Carbon Dividends. Polity (Ed.) 1st Edition (30 Jul 2019).
  6. Ummel, K. “Household Impact Study II (HIS2): The impact of a carbon fee and dividend policy on the finances of U.S. households.” Working Paper v1.1 (Aug 2020).
  7. Nystrom, S. and P. Luckow. “The Economic, Climate, Fiscal, Power, and Demographic Impact of a National Fee-and-Dividend Carbon Tax.” Regional Economic Models, Inc. and Synapse, Inc. (9 June 2014).

This page was last updated on 08/26/20 at 11:54 CDT.

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