Sixteen-year old Greta Thunberg is asking good questions like “why are we doing nothing about climate change?” She tells it like it is as we stand unmoving – no group wanting to give anything away. Unions rightly take the stance that workers should not pay with lowered standards. Some want to play with small tax adjustments to see the poor OK.
The New Green Deal says “never mind the economics of it – we’ll just invest in the planet we want.” That is good, but you need to make sure people have the money to pay for those new high speed rail services and electric buses.
So. No easy solution? Perhaps there is.
Well, try this: The Swedish Sustainable Economy Foundation (TSSEF.se) – hardly alone in the field but one of the early thinkers on this – has developed a dividend model that makes the transition to green easy. Not only will it put money into consumers’ pockets, it will ensure companies with heavy fossil investment can back out without going bankrupt. And those with green solutions will be able to find investment.
The answer is a climate levy on fossil carbon that is regularly raised until the market only consists of green solutions. After levy it is paid out to citizens so that they can afford to buy the new solutions that the market develops.
The model says:
• Add a climate fee to the import or extraction of fossil carbon
• Raise the fee regularly until the market is fossil-free
• Return money to citizens as a monthly dividend
• Adjust the increase of the fee based on the market’s pace of change
You gain the right pace for transition by starting with a low fee and gradually increasing it as transition happens. Companies that have invested in fossil solutions get time to get some return on investments already made.
As the climate fee increases, investors will start to anticipate when green solutions will become competitive. There comes a point when they will dare to invest in the many companies that already offer alternative solutions helping them to scale.
A market for green solutions arises when the climate levy makes fossil products more expensive and green products relatively cheaper. However, consumers must have the money to buy the new products. Every raised tax ultimately means less money in their pocket. Therefore, the climate levy must be paid out in the form of a dividend to citizens. It makes green living affordable and makes people willing to change. According to an American study, 70 percent of citizens would get more in their wallet.
Investors see the new market when they see consumers willing to pay a little more to shop their country fossil-free. Smart inventions are waiting for venture capital which will come when they see government signaling they mean it by raising the fee sizeably and regularly.
Transparency and simplicity come from the fact that the climate fee is levied at source when it is introduced into the economy through import or extraction. Everyone sees the dividend in their account. In this way consumers know that the price they pay for goods goes to stimulate the transition to fossil free. At the same time, they know that the dividend is fair: those who pollute least get the most back and those who can afford to pollute contribute most to transition.
Pollution Price Tag
The climate fee is raised until the market responds and till the desired rate of reduction is reached. At that point the size of the fee will correspond to what it costs to not contaminate giving pollution a price tag.
Don’t just listen to TSSEF. The model has received international attention and is accepted and recommended by high-level researchers and economists, including 27 economists, laureats for the Economics Prize in the memory of Alfred Nobel. Canada has introduced a similar system, the Carbon Dividend, where citizens welcome the rise in prices. Many details remain, but with a climate fee with dividend could have everyone shopping, inventing and investing with a climate conscience. It’s time.
Further reading
Stephen Hinton Consulting 