To Curb Climate Change, Tax Carbon – Then Give Americans the Money

October 12, 2018
By George P. Shultz and Ted Halstead

Most voters want the government to limit carbon emissions, but at a time when half of all Americans own less than $500 in savings, climate ranks low on their priority list. Through our proposal, the Baker-Schultz Carbon Dividends Plan, the United States can address economic insecurity and climate risk at the same time. In essence, the plan divvies out cash to Americans in support of a low-carbon future. And it has the backing of Big Oil.


Economists agree that the most cost-effective climate solution is to put a price on carbon emissions, which could yield hundreds of billions of dollars per year in new revenue. Our plan would start with a carbon fee of $40 per ton, which would raise approximately $200 billion in revenue in its first year. Rebating that money to the American people could revolutionize US environmental and economic policy.


This breadth of support is essential for the system to work and to last. As the carbon price grows every year, so would the dividend to all Americans. This sets in motion a paradigm-shifting feedback loop: the more we protect our environment, the more the majority of Americans reap the rewards.

The system’s popularity is also a necessary pre-condition to strike a nonpartisan bargain. It would simultaneously help the majority of American families get ahead and provide American businesses with regulatory certainty. A robust and growing carbon price would justify phasing out carbon regulations that are no longer necessary, such as the Obama-era Clean Power Plan.

Replacing such regulations with a more cost-effective market solution is attractive to businesses and conservatives. Simply put, we could reduce emissions and the size of government at the same time. This, in turn, would unleash American technological innovation and create incentives to secure our nation’s position at the forefront of low-carbon goods and services.

Our climate and economic debate has been deadlocked for too long. Carbon dividends provide the key to unlocking these puzzles.