Household Impacts

Author: Magnus Haw
Last updated: Feb. 24, 2019, 8:43 p.m.

Study of the effect of a revenue-neutral carbon fee & dividend policy on households. Unlike the REMI study which only resolves 9 regions , this study resolves the impact on every congressional district. Shown below is a brief summary, the full paper is available here, and a FAQ sheet can be found here.

Financial Impact on Households of Carbon Fee and Dividend

In February 2016, Citizens’ Climate Education (CCE) and Citizens’ Climate Lobby (CCL) released a working paper that assessed the net financial impact on U.S. households of a $15/ton of CO2 carbon fee in which all proceeds are returned to households on a per-capita basis. Household Impact Study Highlights: • 53% of US households and 58% of individuals receive a net financial benefit as the dividend exceeds the estimated increase in costs of goods purchased (Figure 1). This analysis assumes that 100% of costs to businesses are passed on to consumers, but does not include any of the health and environmental benefits that come with reducing greenhouse gases and other pollutants. Figure 1: Bar graph showing estimated increase in costs for all US households, as well as for each of 5 income quintiles (quintile 1 = lowest income, quintile 5 = highest income). The average household in any quintile with a cost below$261 would be expected to experience a net benefit from the policy.

• The gains are concentrated among those considered “most vulnerable” within our society: those with lower incomes (Fig 2, below), the youngest and oldest (Fig 3, below), and minorities (Fig 4, below). Since the Dividend formula is not means-tested in any way, this effect stems simply from charging for pollution and returning proceeds equally per person; not any type of redistribution.

Figure 4: Percent of Households benefited or with a minor loss, by race.

• Though households with higher incomes generally experience a net loss in this study, the impact would be minimal. 15% of households in the 5th quintile actually benefit, and an additional 42% experience only a minor loss (defined as a loss less than 0.2% of annual income). Among those that do not benefit, the typical loss is equal to just 0.2% of income.