Carbon Fee and Dividend Policies Would be a Boon for McKinley Park

Published May 15, 2018

By Noah Paulson

Climate change might seem like too big and far away an issue for the McKinley Park neighborhood, but addressing it would realize immediate local benefits. Although dramatic events like Chicago's 1995 heat wave may come to mind first, the burning of fossil fuels such as coal, oil and natural gas has other less obvious, but still deadly effects like increasing our risk for asthma, heart disease, cancer and other illnesses. This is in addition to problems from ongoing climate change caused by release of carbon into the air. We live in the middle of a hot spot: The American Lung Association's 2018 State of the Air report ranks Chicago as the 22nd most ozone-polluted American city.

A nationally enacted policy called Carbon Fee and Dividend would slow climate change, improve our local air quality and deliver significant boosts to the McKinley Park neighborhood economy. Here's how it could work.

First, the U.S. Department of the Treasury would collect a fee on the sale of fossil fuels at their "upstream" point: a well, mine, port of entry or other source where the fossil fuel enters the economy. The fee would begin at $15 per ton of carbon dioxide (CO2) emissions, increasing by $10 annually in order to encourage use of alternative energy sources.

Next, 100 percent of the collected fees would be returned in equal shares to all households in the form of a monthly check or a direct bank deposit.  Adults would get one share, and children under 18 would get one-half share. This dividend would help compensate households for their increased costs for energy and consumer products.

This policy would be "straightforward" to implement, according to a paper from the U.S. Treasury. Most fossil fuels are already subject to excise taxes, which could be adjusted to include the carbon fee. Multiple government agencies have established systems for per-person payments such as those in the dividend element of this policy.

Most significantly, lower- and middle-income communities would come out ahead under carbon fee and dividend policies. Many analyses have determined that households in the bottom two-thirds of income earnings would make more in monthly dividends than they would pay in increased energy costs.

CarbonCredit OpEd MonthlyDividendByFamily chart forweb

A study by Regional Economic Models Inc. found that carbon fee and dividend would also improve the quality of our air, preventing 230,000 premature deaths over 20 years. The biggest winner is the region designated as ENC in the following table, which includes Illinois, Indiana, Wisconsin, Michigan and Ohio.  A side effect of reducing fossil fuel use is the reduction of pollutants such as particulate matter, sulfur oxides and nitrogen oxides.

CarbonCredit OpEd SavedPrematureDeaths chart forweb

If a carbon fee and dividend policy were passed by Congress, employment would be predicted to increase in nine of the top ten industry sectors in the McKinley Park neighborhood. Transportation would see a neutral impact. Most top industry sectors in McKinley Park happen to be the ones predicted to benefit the most from carbon fee and dividend.  Current top industries in McKinley Park by employment are, from highest to lowest: hospitality, retail, manufacturing, administrative, healthcare, education, wholesalers, construction, finance and insurance, and transportation.

CarbonCredit OpEd EmploymentByIndustry chart forweb
This chart recasts the total employment by region and nationally from previous figures into the difference in jobs by industry relative to the baseline. Most sectors, with the exception of mining and utilities, have a positive impact to their employment levels. 

The above chart from Regional Economic Modeling Inc. forecasts effects of carbon fee and dividend policies on various industry sectors nationwide. Many of the largest industry sectors in McKinley Park are among those predicted to grow the most with this policy. Furthermore, this policy would amplify the benefits of C40’s Reinventing Cities design competition, which aims to encourage development in the Central Manufacturing District and offer employment opportunities for the community. These carbon-neutral development plans would be well-suited to benefit from carbon fee and dividend policies.

But we don’t just have to rely on studies to predict the effects of this policy. Carbon pricing has been enacted in dozens of countries. In fact, nine of the 10 largest economies in the world are currently planning or have implemented some form of carbon pricing.

The closest and perhaps most similar example can be found just to our north in Canada. In 2008, the province of British Columbia enacted a small, but steadily rising, revenue-neutral carbon tax. Between 2008 and 2013, fossil fuel emissions in the province decreased while the province’s economy slightly outperformed the rest of Canada. It was considered such a success that Canada is now implementing a carbon tax nationwide. While British Columbia’s tax has some key differences with carbon fee and dividend policies, it provides an example for the fundamental economic benefits of carbon pricing.

In November, a resolution was introduced in Chicago’s City Council calling on the U.S. Congress to pass national carbon fee and dividend legislation.  The resolution acknowledges the local health and economic risks of climate change, and draws attention to the opportunity for the United States to be a pioneer in the clean energy technologies of the 21st century.  This resolution wouldn’t create a law or ordinance in Chicago. Rather, it would be a statement by the City Council asking for carbon fee and dividend to be passed as federal policy by Congress. This resolution will soon be scheduled for a hearing in Chicago's Committee on Health and Environmental Protection.  

As the chairman of this committee and as one of this resolution’s sponsors, 12th Ward Alderman George Cardenas is leading the effort to pass this resolution. The 12th Ward is fortunate to have an alderman who has advocated for environmentally responsible policies, such as Cardenas' calling for the enforcement of anti-idling laws to improve air quality near schools.  

If Chicago succeeds in passing the carbon fee and dividend resolution, it will join 84 municipalities across the country that have passed equivalent resolutions calling on Congress to pass carbon fee and dividend. These other municipal supporters include Philadelphia, San Francisco, Portland, Pittsburgh and the state of California.  

More information about carbon fee and dividend can be found at citizensclimatelobby.org. Charts and a full report from Regional Economic Modeling Inc. are available at citizensclimatelobby.org/remi-report/.

Dr. Noah Paulson is a computational materials scientist working at Argonne National Laboratory and is living in the Bridgeport neighborhood. Noah has been a volunteer with Citizens’ Climate Lobby for over a year.


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