Carbon Dividend Administration

The Citizens’ Climate Lobby advocates a system of Carbon Fee and Dividend (CFD), in which revenues from steadily rising “carbon fees” on fossil fuels are returned monthly or quarterly to the private sector via dividends to consumers.  Administration of CFD will require workers and managers in a new department inside an existing agency, or in a new agency.  The work will include determination of the carbon dividend share and amount that should be allocated to each eligible person in a payout period, and sending the amount to that person via a check or direct deposit in his or her bank account.

Consumers will be best served with smooth and continuously rising dividend streams, but fluctuations in the economy will produce fluctuations in the carbon fee revenue streams.  Management will need to plan ahead and create a reserve to balance them.  I recommend that all this CFD work be done in a new agency with the name Carbon Dividend Administration (CDA).

Before presenting arguments for a new CDA, I will address a common assumption:  that a separate agency will add to administrative cost.   Language in Section 19 of a report issued by CCL in 2016 negates this assumption:

“Even if hand led by the IRS or the SSA, a completely separate staff and completely separate accounting, record keeping, and computer systems would be necessary for the Dividend payments.”

To review this report go here.

Some suggest that the CFD work be done inside IRS.  An editorial in the New York Times on December 30, 2017 describes this agency as severely stressed, largely due to under funding and political attacks from Congress.  It is unable to do its job properly.  The many changes in the recent tax bill will make things worse.  Adding administration of CFD to this workload would be a very bad idea.

An independent CDA is a good idea for several reasons:

  • The CFD program will not add to the burden of the already stressed IRS.
  • CDA will begin with a clean slate, one not tarnished by the reputation of the IRS.
  • All CDA managers and employees will be able to focus their attention on the CFD program and build a reputation for fairness and competence.
  • Because it will be distributing money to ordinary citizens, not collecting it from them, and if it does its job well, CDA will become popular and unlikely be the target of political attacks.
  • CDA will be the public face for the CFD program.  Public support for CDA will translate into public support for CFD.  This support will be essential as carbon fees rise, and rising prices of products and services dependent upon fossil fuels begin to squeeze.
  • Names are important.  The word “dividend” is more appealing than “revenue” and “carbon” is a reminder of the great challenge we face.

Some suggest that CFD work be inside the Social Security Administration.  SSA is also underfunded and stressed, but not so severely as IRS.  The arguments for an independent CDA remain and are strong.

A new Carbon Dividend Administration will produce better outcomes then the alternatives and will not add to administrative costs.

Bill Allen,    12-31-17

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