What if we could click our ruby slippers and transport ourselves to a magical place where polluters pay and we all get checks in the mail? The Oregon legislature is considering two bills that would take us there.
When designing a program to make climate polluters pay, one of the most important decisions is what to do with the money. Northeast states and California invest in energy efficiency and transportation. British Columbia gives tax cuts to people and businesses. Two Oregon bills contemplate mailing out dividend checks. If Oregon passed a polluters-pay-plus-dividend bill, the air would no longer be a free dumping ground for pollution, clean energy would be on an even playing field with fossil fuels, and each Oregonian would get a check for $500-$1,500 every year. Sound too good to be true? It’s not. Here are the details, Q & A style.
1. What are these Oregon dividend bills and what do they do?
HB 3176 would charge fossil fuel sellers a fee for each ton of pollution, starting at $30 per ton and increasing by inflation plus $10 per ton every year. All the money would go into a Trust Fund. Each September, the Department of Revenue would mail every Oregon taxpayer and taxpayer dependent a check for an equal share of the money.
HB 3250 would do roughly the same thing, but instead of creating a set fee schedule it would create a set number of pollution permits that fossil fuel sellers could buy in an auction. Each year, less pollution would be allowed and fewer permits would be available. By 2050, Oregon’s climate pollution would be 85 percent below 1990 levels. As permits become scarce, the price would go up.
2. Why are there two bills? Is one better than the other?
Both bills lead to the Emerald City, but they encounter different lions, tigers, and bears along the way.
HB 3176’s tax could be implemented quickly, with little administrative overhead. But it would need a constitutional amendment. Article IX section 3a of the Oregon Constitution conscripts all taxes on motor vehicle fuels for use on highways, not dividends for Oregonians. HB 3176 would also need to garner support from 60 percent of legislators, because Article IV section 25 of the Oregon Constitution, as amended in 1996 by Measure 25, requires three-fifths of legislators to approve tax increases. Alternatively, the legislature or voters could reverse the Measure 25 amendment and reinstate majority rule in Salem, as Washington’s supreme court did in 2014.
HB 3250, on the other hand, could pass by simple majority in the legislature and would not be subject to the limitations on gas taxes. But the Department of Environmental Quality would have to set up a permit and auction system, which would take time.
3. Why give everyone a check?
We all own the sky. Clean air is a shared asset. If a private company wants to use our air, it should have to pay us. Just like shareholders get a dividend check from company profits, Oregonians could get a dividend check when fossil fuel companies appropriate the atmosphere.
4. Would charging polluters and paying dividends to Oregonians really help Oregon transition to clean energy?
If fossil fuel companies paid a fee to dump their pollution—just like you and I pay a fee to dump our trash—it would level the playing field between energy sources. Solar and wind continue to grow faster than anyone predicted, but they could grow even faster if fossil fuel sellers weren’t getting a free lunch. In a fair competition—where fossil fuels aren’t stealthily passing their costs along to us in our health bills, fire department bills, water bills, and damages to our shellfish industry—clean energy would prosper and fossil fuels would wither.
5. But don’t we need the money to fund clean energy?
We have most of the technologies we need to transition to clean energy. We just need to scale up. Utilities and private companies can invest in scaling up. Setting a hard cap or increasing tax on pollution will make clean energy more competitive than ever, whether or not the proceeds of capping or taxing are dedicated to clean-energy subsidies.
6. Will the dividend checks go away?
Not until the latter half of the century. To avoid the worst effects of climate change, we must facilitate an orderly, multi-decade, transition from fossil fuels to clean energy. As permits become rarer they would also become more valuable, so the Trust Fund and dividend checks would continue to grow for decades before leveling off mid-century. Even with the aggressive pollution cuts science requires, we will still use some fossil fuels in 2050. Eventually the Trust and dividend checks would wane as we move towards a 100 percent clean economy by the end of the century.
7. Polluters will pass costs along to consumers—won’t that hurt low-income people?
About two-thirds of households would be richer with a polluters-pay-plus-dividend law. While low-income households spend more of their money on fossil fuel energy compared to better-off households, they still don’t spend that much. Low-income Oregonians’ fossil fuel costs would rise about $100, so the $500 dividend check would leave them $400 better-off.
Original Sightline Institute graphic, available under our free use policy.
Upper-income families spend much more money, so they would see a slight (2 percent, according to an analysis of a nation-wide cap and dividend law) increase in expenditures, even after the dividend check. But wealthier households often have options to oust fossil fuels, by retrofitting their homes, for example, or buying clean energy from their utilities or putting solar panels on their rooftops or buying more efficient cars.
8. Polluters will pass costs along to consumers—won’t that hurt people in rural Oregon?
No. People in rural Oregon, on average, would make money from a polluters-pay-plus-dividend law.
Say what?
It turns out, rural Oregonians emit about half as much pollution as urban. Portland State University modeled a carbon tax in Oregon and found that 43 percent of Oregonians live in the Metro region but emit 60 percent of the pollution. Non-Metro Oregonians would pay 40 percent of a carbon tax but would get 57 percent of the value back in dividend checks.
This is partly because rural Oregonians, on average, have cleaner electricity than urban. Most of rural Oregon—about 30 percent of the state overall—gets electricity from consumer-owned utilities (COUs: public utilities, cooperatives, and municipal utilities). COUs get 85 percent of their power from carbon-free hydro. COU customers pollute less, and therefore would pay less, than Pacific Power customers who get 67 percent of their power from coal, or Portland General Electric customers with 30 percent coal.
Contrary to popular myth, rural Oregonians do not all drive more than urban residents. According to a 2012 survey, people in rural Western Oregon drive about 7 percent less than urban Oregonians, while people in rural Eastern Oregon drive about 13 percent more. Rural eastern Oregonians might pay about $2 per month more than urbanites. The $500 dividend check would more than cover that difference.
9. Is this just another “tax-and-spend” plot to grow the government?
Not at all. The money would go from fossil fuel sellers to Trust Fund to dividend checks. Public agencies would not spend any of it.
10. Is this just about climate change or is it more than that?
Climate change threatens the Pacific Northwest, but it is not the only threat. Cascadia’s middle class is also imperiled. Readers of Thomas Piketty’s Capital In the 21st Century, or even of Rich Dad, Poor Dad know that rich people mostly don’t get rich by working (labor income), they get rich and stay rich and make their kids rich by owning assets that produce non-labor income. Because non-labor income grows faster than labor income, and the US tax system favors non-labor income over labor income, almost all the economy’s gains in productivity accrue to the people who own companies, stocks, and property. Wages for middle-class workers—people who work for their living—have flat lined.
To resuscitate the middle class, we need to find a mechanism for more people to own assets that generate non-labor income. We could give everyone an ownership share in common assets such as our money supply, air, land, and water. A carbon pollution dividend could be the first step toward such shares.
11. Is anyone else considering this idea?
Members of the US Congress have introduced several dividend bills. The “Healthy Climate and Family Security Act” would pare pollution to 80 percent below the United States’ 2005 emission levels by 2050. Fossil fuel companies would buy permits at auction and deposit the fees into a Trust Fund. The administrator of the Fund would send checks every quarter to all Americans with social security numbers.
Alaska already has a dividend program. The Alaska Permanent Fund is not about pollution, but it ensures that all Alaskans get a dividend from their rightful share of the state’s resources. A Republican Governor created the Alaska Permanent Fund and Sarah Palin expanded it, explaining that a state’s resources should be for the “benefit of the people, not the corporation, not the government, but the people of [the state].” Since 1982, the Fund has paid out $19 billion in dividends to Alaskans.
12. Why doesn’t everyone love this idea?
A polluters-pay-plus-dividend law should appeal not only to liberals who want to stop climate change, but to everyone who would like to get a check every year. Even Fox News conservatives like Bill O’Reilly and Lou Dobbs agree that certain resources belong to The People and energy companies should have to pay into a Fund that pays out to citizens, putting “a little dollar sign next to what it’s worth to be a citizen.”
Why aren’t we doing it already!?
Many people think it sounds too good to be true. They can’t believe the state treasury will really send everyone a check. They can’t believe we could really break fossil fuels’ stranglehold on our economy. And fossil fuel interests know that if each man, woman, and child in Oregon starts getting a $500 check, there will be no going back to the free lunch.
Walter
Cap and trade should be an integral part of this plan otherwise it is all controlled by the government in issuing permits and the like.
In Oregon, our forests provide carbon storage in public and private lands. Allowing private landowners to refrain from harvest in the interest of carbon sequestration credits, and in turn, resell the credits for a profit.. This could apply to state, national and BLM forests distributing the benefits across the board. Perhaps we don’t need reinvent but rather get on board and promote an existing model.
Joan Grimm
I heard Kristen Eberhard speak in NW Portland last night and she gave a really fantastic presentation of the information in this post. I left feeling very hopeful and energized! Thank you so much for the work you are doing!
Alex M. Ladzinski
Though I am a conservative I am a different type compared to how media defines the word. Being conservative in terms of the environment means that I like to see our resources conserved and protected and in a very logical sense the air is a sort of dumping ground that industry has been abusing for years. It’s time for reality to kick in. The air that surrounds the earth is likened to a sheet of plastic food wrap around a basketball. That not very thick. Sure industry creates money and wealth but what good is it if your are dead.
Jeff Hughes
The dividend checks generated by this plan are only one of the benefits for all citizens. If this idea is enacted all Oregonians will reap the health benefits of slowing the carbon output. Decreasing pollutents in our atmosphere can directly affect cost per patient day in our hospitals. Most of us have little enough to spend with out pollution increasing the amount we must pay to stay healthy.
Mike S.
Hi Kristin,
Great article! So excited to see what is happening in Oregon! Wishing you much success,
-Mike
Byron Harmon
Cross sectionally across the US, Gasoline prices increase by 1.3 cents for each cent of gasoline tax. If the sellers of gasoline pass the tax onto consumers and lower income people get the same dividend as the rich, won’t this just mean more gasoline consumption and greater profits for gas companies? Gasoline and fossil fuels are extremely inelastic. From 1991 to 2007 gas increased, on average, 18 cents/year, yet during this interval gas consumption in the US only increased. How does does the tax and dividend solve the larger cultural aspect of gasoline consumption?