Carbon Fee & Dividend

James HansenWhy do fossil fuels continue to provide most of our energy? The reason is simple. Fossil fuels are the cheapest energy. This is in part due to their marvellous energy density and the infrastructure that has grown up around them. But there is another reason: We do not take into account their true cost to society. Effects of air and water pollution on human health are borne by us, the public. Damages from climate change are also building inexorably and they will be borne especially by our children and grandchildren.

James Hansen, leading climate scientist and former director of NASA Goddard Institute for Space Studies.


Carbon Fee and Dividend is the policy proposal created by Citizens’ Climate Lobby to internalise the costs of burning fossil fuels. It’s the policy that climate scientists and economists alike say is the best first-step to reduce the likelihood of catastrophic climate change from global warming. Citizens’ Climate Lobby volunteers pride themselves in being FOR something rather than AGAINST things.

Pricing carbon

As long as fossil fuels remain artificially cheap and profitable, their use will rise.

Correcting this market failure requires their price to account for their true social costs.

To gain cross-party support we advocate for a true cost-comparison between competing fuels AND reducing greenhouse gas emissions.

Accounting for the true cost of carbon-based fuels not only creates a level-playing field for all sources of energy, but also informs consumers of the true cost-comparison of various fuels when making purchase decisions.

Returning the revenue to the public

100% of the revenue from the carbon fee is returned directly to households as a monthly dividend.

The vast majority of households will receive more in dividend than they pay for increased energy costs. This feature will inject billions into the economy, protect family budgets, free households to make independent choices about their energy usage, spur innovation and build aggregate demand for low-carbon products at the consumer level.

Border adjustments to protect UK businesses

Import fees on products imported from countries without a price on carbon, along with rebates to UK industries exporting to those countries, will discourage businesses from relocating where they can emit more CO2 and motivate other countries to adopt similar carbon pricing policies.

Firms seeking to escape higher energy costs will be discouraged from relocating to non-compliant nations (leakage), as their products will be subject to import fees.

A rising price on greenhouse gas emissions will focus business planning on optimising investment priorities to thrive in a carbon-constrained world.

A fair and practical solution

Carbon Fee and Dividend does not increase the size of government, require new bureaucracies or directly increase government revenue. The dividend increases real disposable income, protects personal spending decisions and will recruit widespread, sustained engagement.

Finally, Carbon Fee and Dividend is elegant in its simplicity, transparent in its accessibility to public scrutiny and clear in its signals and benefits.