Climate income is a rescue plan

We don’t have to resign ourselves to an otherworldly future of devastating health effects and escalating harm and cost. It is possible to decarbonize while building better, healthier economies.

The latest IPCC report is clear: Only with immediate, transformational climate action, operating everywhere toward maximum ambition, can we limit global heating to 1.5ºC. Beyond that, the compounding impacts of extreme climate disruption become too costly to manage. The systems we rely on now to provide everyday services, health, and prosperity, will fail.

As U.N. Secretary-General Guterres rightly says, the best science we have—endorsed by 195 nations—is sending a signal of “code red for humanity.”

The experience of unprecedented fires, droughts, storms, and floods, feels otherworldly, because they are actually the result of changing planetary systems. Avoiding still worse requires efficient, immediate, economy-building action.

Not only must we decarbonize energy systems, industrial production, and transport; we must also transition to climate-smart agriculture and land use, invest in systematic and routine protection of watersheds and marine ecosystems, and prioritize circular economies, so production and waste management are less harmful. We need to build resilience, and open resilience-building economic opportunity to everyone.

There will be thousands of small policy changes and business model innovations, subtle ways of upgrading our everyday experience, and an unprecedented infusion of decisional climate data into our everyday lives. Mainstream finance must not only support and sustain this worldwide revolution; it must be accountable to stakeholders and be capable of integrating Earth systems data.

There is talk of a climate action Marshall Plan, a global project of economic cooperation for sustainable development. The European Union is piecing together the first multinational “Green Deal”—an environmentally responsible economic development compact, intended to ensure the best and healthiest future for everyone.

In the United States, President Biden’s Build Back Better agenda looks to build a climate-smart future of expanded economic wellbeing, in which opportunity is open to everyone, regardless of wealth, geography, industry, or background. Financial regulators are looking at how to reliably quantify climate-related liabilities and how to grade investments for their resilience value.

Every decision we make will either advance or set back these efforts, and as this month’s IPCC report makes clear: We cannot afford any slowdowns or reversals. This is true for petro-states, too: food systems are gravely at risk from worsening climate disruption, as are water supplies, and other core drivers of everyday health and wellbeing.

So, if the world moves forward with a climate action Marshall Plan, how would we ensure the everyday details of economic activity are drivers of its success?

Climate income policies can play this role. In the most straightforward case, a climate income policy includes:

  • A steadily rising fee on carbon-emitting fuels, applied at the source—mine, well, or port of entry);

  • Return of 100% of revenues to households, every month—both to prevent deflection of pollution costs and to ensure the clean economy is well funded by everyday spending;

  • A carbon border adjustment—ensuring polluters cannot simply cheat by moving pollution to other nations.

Evidence shows climate income systems increase household incomes for 2/3 of households—in a high-income country like the United States. There is reason to suspect generalized income gains would be even higher in lower-income countries. This becomes an incentive for market actors—innovative enterprise—to capture the low-carbon spending that will result. That incentive can be magnified by shifting subsidies and tax policies to ensure low-carbon business strategies proliferate and can tap into low-carbon supply chains.

With the EU Green Deal set to include a carbon border adjustment mechanism, the IMF exploring the value of an international price floor for carbon pollution, and more than $70 trillion in assets under management committing to realign to support net-zero emissions targets… an economy-building carbon pricing plan may be the best way to enhance any nation’s efforts to achieve climate-smart future prosperity.

How, exactly?

  1. By making polluters pay for their pollution.

  2. By enhancing household incomes to motivate spending on decarbonized business models.

  3. By leveling the playing field, so low-carbon enterprise isn’t cheated by free pollution overseas.

  4. By building a clear price signal into every transaction, so high-carbon business operations can chart their own path to a low-carbon future.

  5. By revealing for all investors, in the public and private sectors, the value of rewarding climate services.

In short, climate income policies can provide a shortcut to a better future.

The disingenuous debate about the “cost of climate action” is outdated. The best science, endorsed by all governments, and our everyday lived experience clearly show failing to prevent dangerous global heating is unaffordably costly. The question is whether we will rapidly deploy the solutions that allow us to safely decarbonize while building an economy in which everyone is better able to prosper and thrive.