What Is the “Carbon Dividend”?
Over the last five years, the effects of global warming have become more and more apparent.
We’ve seen record wildfires in California. Some streets in Miami regularly flood at high tide. And parts of Venice are under a foot of seawater.
Plus, glaciers are melting at an epic rate. It’s predicted that the northern polar ice cap will completely melt by 2040.
The evidence of global warming is, quite plainly, undeniable.
Last November, the U.S. Global Change Research Program released the Fourth National Climate Assessment.
Its message was loud and clear: Regions and economic sectors nationwide are being negatively affected by global warming.
Without further action, global warming will “wreak havoc on our health, lands and economy.”
Though President Trump rebuffs the idea of climate change, many conservative legislators are becoming believers. One of them is Rep. Francis Rooney, co-chairman of the bipartisan Climate Solutions Caucus.
The Washington Examiner recently asked Rooney about his new role. He said, “As a Republican, I would like to see us adapt to the future and broaden our base as opposed to becoming extinct.”
The Carbon Dividend
At the end of 2018, the Climate Solutions Caucus introduced the Energy Innovation and Carbon Dividend Act, the first piece of climate-oriented legislation proposed at the federal level in more than a decade.
As scientists believe increased carbon dioxide levels are the primary cause of global warming, this bill would enact a tax on fossil fuel-producing companies for the carbon dioxide they pump into the atmosphere. Businesses and consumers who use carbon-rich products would also pay a tax.
Taxing fossil fuels would prompt engineers to develop carbon-free or lower-carbon alternatives. Producers would likely switch to or develop green products instead of paying the tax.
Plus, higher prices on products that contribute to the carbon dioxide issue would push consumers to use less of them or seek environmentally friendly alternatives.
Overall, American companies and consumers would be incentivized to move toward cheaper, cleaner solutions.
Most prior carbon tax bills didn’t address how the collected taxes would be spent. But this new bill would allow the government to create a Carbon Dividend Trust Fund from which to issue a monthly refund – what many are calling a “carbon dividend” – to American taxpayers.
According to the Citizens’ Climate Lobby, about two-thirds of Americans would receive more in dividends than they would pay in carbon taxes.
How to Act
Unfortunately, with today’s Republican-controlled Senate, I’m skeptical that the bill will pass.
However, it will be a litmus test for a national carbon fee and dividend system.
In the meantime, the best way to invest in the move to a lower carbon world is through renewable energy.
Many renewable energy companies aren’t based in the U.S. Some don’t even trade on U.S. exchanges.
That’s why I like the convenience of exchange-traded funds (ETFs), which make it easy to invest in a portfolio of companies.
Right now I have my eye on the Invesco Solar ETF (NYSE: TAN).
A more diversified renewable ETF is the iShares Global Clean Energy ETF (Nasdaq: ICLN). It holds a portfolio of 30 “clean energy” companies.
The fund defines clean energy companies as those producing ethanol, biofuels, or geothermal, solar, hydroelectric or wind energy. It invests in developers of clean energy equipment and technology.
There are plenty of other renewable energy ETFs to choose from. Share your favorite in the comments section.