Carbon Dividend
A policy that rebates carbon-tax revenue equally to households so most people receive more back than they pay.
What You Need to Know
A carbon dividend returns the money collected from a carbon tax directly to households. Each household receives the same payment, which makes the policy progressive because lower-income families typically have smaller carbon footprints.
How It Works:
- Carbon tax revenue is collected from fossil fuel sales
- Total revenue is divided by the number of households
- Payments are issued monthly, quarterly, or annually
- Some plans adjust for family size or index payouts to inflation
Why It Matters:
- About 60-70% of households come out ahead financially
- Offsets higher energy costs created by the tax
- Builds political support for carbon pricing
- Encourages continued emission reductions while protecting budgets
Examples: Canada’s Climate Action Incentive, proposals from the U.S. Citizens’ Climate Lobby, and Alaska’s oil-funded Permanent Fund Dividend.
Sources & References
This information is sourced from authoritative government and academic institutions:
- treasury.gov
https://www.treasury.gov/initiatives/financial-stability/reports/
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Related Terms in Policy & Economics
Carbon Footprint
The total greenhouse gas emissions caused by an individual, organization, or product, measured in CO2 equivalents.
Carbon Offset
A reduction in greenhouse gas emissions or increase in carbon storage to compensate for emissions made elsewhere.
Carbon Tax
A government policy that charges emitters a fee for each ton of carbon dioxide they release into the atmosphere.
Electric Vehicle (EV)
A vehicle powered by an electric motor and battery pack instead of an internal combustion engine.
Energy Efficiency
Using less energy to perform the same tasks, reducing energy waste and costs.
Greenhouse Gas
Gases in Earth's atmosphere that trap heat and contribute to global warming, including carbon dioxide, methane, and nitrous oxide.