Ecosystem Services and Carbon Dividends

In the late 1990s, entrepreneur and author Peter Barnes began writing about the commons. He proposed that formalizing universal rights to common assets via trusts could help solve both economic inequality and environmental degradation. As applied to the atmosphere as a carbon sink, this produced the idea of the carbon dividend. Barnes’s idea was taken up by others, including climate scientist James Hansen, and carbon dividends are now in the mainstream of climate change mitigation policy debates in the U.S. Many nations and subnational jurisdictions already recycle some carbon pricing revenue back to citizens. This chapter walks through the elements of a viable carbon tax or cap-and-permit system. It argues that dividends will be an essential element of any successful carbon pricing policy design. Meeting climate change mitigation benchmarks will require carbon prices to rise much more rapidly than they have to date, and many households will require a financial boost from carbon dividends (or similar) to weather the transition.