Hansen’s ‘fee and dividend’ plan: An exchange

Related articles:

• John Bellamy Foster. James Hansen and the climate-change exit strategy. Monthly Review, October 2013.
• Anders Ekeland. A left ‘exit strategy’ from fossil fuel capitalism? Climate & Capitalism, May 5, 2014.
• Ian Angus. Hansen’s program is more than a carbon tax. Climate & Capitalism, May 12, 2014.

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Introduction by Ian Angus

For some time, prominent climate scientist and activist Jim Hansen has argued for a “fee and dividend” plan as part of a program to radically reduce fossil fuel use. Under his plan, which he counterposes to cap-and-trade and other such schemes, a heavy fee would be imposed on fossil fuels at the point of production or port of entry, and all the money collected would be distributed to the public on a per capita basis.

In the October 2013 issue of Monthly Review, John Bellamy Foster argued that socialists should support Hansen’s proposal as part of a broader “Climate Change Exit Strategy.”

Last May, Climate & Capitalism published an article on Hansen’s proposal by Anders Ekeland and a reply from me. We both supported fee and dividend, but I argued that Ekeland had misunderstood the dividend component of Hansen’s plan — he described it as “adapted to the U.S. political context” and “completely individualistic,” and suggested that in other countries the money collected could be spent by government on social projects. This, I said, missed the point:

“Unlike every actual carbon tax plan proposed or implemented in the world today, Hansen’s fee and dividend plan has a strong class component: it would take from rich corporations and give to the poor, creating a material incentive for working people to support the carbon fee and oppose corporate efforts to weaken it. If the money goes into government projects, no matter how worthy, it will be seen as just another attack on working class living standards, and how it is spent will be subject to the whims of capitalist politicians.”

Recently ecosocialist Michael Friedman wrote questioning that part of my article. He has kindly given permission to post his email here, followed by my response. I look forward to further discussion in the Comments section.

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A comment from Michael Friedman

Dear Ian:

Someone posted your response to Ekeland’s critique of Hansen on the Solidarity ecosocialist list. I responded with some misgivings and said I should seek some clarification from you, and so I shall. My note to the list:

First, unless the fee were very substantive, indeed, it would amount to very little when divided among the 242 million adults in the U.S. For example, U.S. and Canadian fossil fuel corporations made $271 billion in profits in 2012. So, if you taxed 100% profits, each adult would get around a thousand bucks. A year. Meanwhile, fossil fuel price increases tend to have a multiplier effect (at least they have in the past) on product price increases, that is, product prices have gone up as multiples of the fuel price price increases. At least in part that is because of the many ways that fossil fuels currently enter into final product costs: transportation, energy and raw materials of production, packing materials, other energy costs, etc. And the more substantive the fee, the more prices of downstream products will go up. Food, housing, clothes, transportation, heating — it would all go up: Weekly grocery bills, monthly rent and winter heating, metro cards — poor people pay disproportionately for these, as it is. So, I don’t see how Hansen concludes that “the poorest 60% of the U.S population … would receive more in dividends than they would pay in increased fuel and other prices.” At the very least, the increase in costs would eat up the dividend.

Angus argues that “Hansen’s fee and dividend plan has a strong class component: it would take from rich corporations and give to the poor, creating a material incentive for working people to support the carbon fee and oppose corporate efforts to weaken it. But, the dividend wouldn’t just go to the “poor” (and since when is “poor” a “class”?), it would go to everyone, and as Ekeland says, as an individual bonus. So, there is nothing intrinsically in it to generate class expectations, collective consciousness or a sense of class power. No more — and probably less — than my April tax refund, which at least accrues because my income is so fucking low.

Angus further argues, “If the money goes into government projects, no matter how worthy, it will be seen as just another attack on working class living standards, and how it is spent will be subject to the whims of capitalist politicians.” By this reasoning, socialists should no longer raise slogans like “money for schools, not for war.” I think Angus misses the point of raising such demands in a transitional program. Yes, they are ameliorative and cost-effective, but they also point to the inability of capitalists to fulfill these social needs and — in our case, very important — they counterpose the benefits of social to individual needs fulfillment.

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A reply by Ian Angus

Dear Mike:

Thank you for writing. You have raised some important and thoughtful questions — and you’ve done so clearly and concisely. I hope my reply is as clear, but I’m afraid it will not be as concise!

First, I want to stress that my primary criticism of Ekeland’s article dealt not with how the “dividend” should be distributed but with the fact that, in the words of my title, “Hansen’s program is more than a carbon tax.”

“Ekeland reduces Hansen’s program to just one element – fee and dividend – entirely omitting many essential components. He compounds that error by using fee and dividend as a starting point for defending carbon taxes in general.”

As I wrote, fee and dividend as a standalone measure “isn’t sufficient by itself, and isn’t suitable for building the mass movements that socialists know are needed.” Hansen himself says, “By itself a carbon fee cannot solve the energy problem and allow rapid coal phase-out.” That’s why his program includes a range of measures, including phasing out all coal-fired plants, stopping all production of non-conventional fossil fuels, including tar sands oil, shale oil and gas, and methane hydrates, extensive carbon conservation policies, a transition to low-carbon farming and forestry, and more.

Hansen’s program is not perfect or complete. But when an important figure in the environmental movement targets corporations instead of working people as consumers, socialists must take heed. We need to support that important advance, while of course continuing to raise our own, more radical demands.

Ekeland’s approach, by contrast, made Hansen’s program less radical. He described “command-and-control regulation” — which Hansen’s full program would certainly entail — as a “totally unrealistic” approach that leads inevitably to black markets with “horrific prices and speculation.” He reduced Hansen’s attack on the property and activity of fossil fuel companies to a regressive tax on consumers.

In Ekeland’s view, Hansen’s plan to distribute revenues to the public on a per capita basis just reflects the political backwardness of the U.S.A. — in countries “where people are less skeptical of ‘big government’” the money could be kept by the government and used for progressive projects.

As you know, I strongly disagreed, saying that such an approach would be seen “as just another attack on working class living standards.”

You raise three objections to my argument: that the dividend would not be big enough to win wide support, that I’m wrong to say Hansen’s plan has “a strong class component,” and that calling for the funds to go into social programs is a more transitional approach. I’ll respond to each point in turn.

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How much money? You question whether the money raised by Hansen’s fee would be sufficient to motivate broad support. I haven’t checked the numbers, but I accept your calculation that taxing 100% of fossil fuel profits would only produce about $1000 per person for distribution, and in that case “at the very least, the increase in costs would eat up the dividend.”

But Hansen is not proposing a tax on profits, which accountants can easily conceal or minimize — he calls for a tax on carbon, which is physically measurable and hard to hide. That would produce a different result. In Storms of My Grandchildren (Bloomsbury, 2009), he explained his calculation of the dividend:

“As an example, consider the point in time at which the fee will reach the level of $115 per ton of carbon dioxide. A fee of that level will increase the cost of gasoline by $1 per gallon and the average cost of electricity by around 8 cents per kilowatt-hour. Given the amount of oil, gas, and coal sold in the United States in 2007, $115 per ton will yield $670 billion. The resulting dividend will be close to $3,000 per year, or $250 per month for each legal adult resident; a family with two or more children will receive in the range of $8,000 to $9,000 per year.” (p. 209)

I’m sure we agree that $3,000 a year would be a significant benefit for the 42 million people who live below the official poverty line in the U.S., and that $9,000 for a two-adult, two-child family would make a significant difference in a country where the median household income in 2012 was just $51,000. Hansen estimates that 60% of people would receive more than they would pay, and to my knowledge no one has disproved that.

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Class component? You question my statement that Hansen’s plan has “a strong class component,” pointing out that the payments would go to “everyone … on an individual basis” so “there is nothing intrinsically in it to generate class expectations, collective consciousness or a sense of class power.”

By giving the money to everyone, including the wealthy few to whom it would make no difference, Hansen’s plan would minimize bureaucracy and simplify distribution, and above all avoid the intrusive and demoralizing means tests that characterize most welfare schemes under capitalism. Those are goals socialists should support.

More important, this arrangement ensures the “polluter pays” character of the program. This is in stark contrast to all other “price on carbon” proposals, which would make the working class pay, in increased prices, for reducing emissions that they didn’t cause. Hansen’s plan targets the corporations, and shields working people from the worst effects of the transition away from fossil fuels. That’s why I say it has a class character.

As for generating “class expectations, collective consciousness or a sense of class power” I agree that a monthly check by itself won’t do that — nor will any plan by itself. A sense of class power will only be built through mass mobilization to win such demands and to protect the gains we win. Hansen’s program — his full program, with fee and dividend as one component — provides a basis for a united movement to achieve such mobilization.

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Social programs? Ekeland seemed to argue that whether the money should be spent on government programs or distributed depends on whether the local political culture is individualistic or ‘less skeptical’ about government. If I understand correctly, you argue that directing funds to social programs would be superior in either situation, because it embodies a transitional approach that counterposes “the benefits of social to individual needs fulfillment.” You say that my argument would lead socialists to also oppose slogans like “money for schools, not for war.”

I disagree. When we say “money for schools, not for war” we are not calling for a new regressive tax. Quite the opposite: we are demanding that better schools be funded without reducing workers’ incomes, by redirecting money that is currently used for programs that are contrary to workers’ interests. We are directly contradicting the standard capitalist argument that improved social benefits must be paid for in a lowered standard of living, an argument that frequently convinces workers to oppose social programs.

A fee-without-dividend plan would effectively be a new regressive tax, paid in increased prices. Like most other “price on carbon” proposals, it would “make consumers pay” and hit the poorest people hardest. Socialists are in favor of social solutions, but we oppose making the working class pay for them. That’s why the socialist movement has traditionally opposed sales and other indirect taxes. In my view we should continue to do so.

Yes, transitional demands should point to social solutions. But even more importantly, they should contribute to mobilizing mass action against our corporate rulers and for concrete, progressive goals. That, I think, is why socialists should support fee and dividend — because it connects the demand to reduce emissions, which is important but seems abstract to most people, to the very concrete struggle against wage cuts, austerity and poverty. What’s more, the solution it offers is both eminently reasonable and objectively radical.

Ekeland, despite his unfortunate support for regressive taxes as social policy, actually got that point right. Despite his previous objections to per capita distribution, he concluded his article with what can only be read as an endorsement of Hansen’s proposal:

“‘Climate’ money each month going into poor people’s bank accounts would unite the demand for income redistribution with working people’s fundamental long-term environmental demand for a healthy planet.”

Really, that’s the whole point, and I don’t understand why he didn’t support it consistently.

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Finally, I just want to add that while it’s important for ecosocialists to discuss these issues, the appropriateness of a given proposal cannot be judged in the abstract. The only test is practice — a demand or slogan may be ideal in one situation and completely wrong in another. Our general approach is to advocate what Marx and Engels called “despotic inroads on the rights of property, and on the conditions of bourgeois production,” but the question of how to allocate any proceeds derived from those inroads is not a matter of principle, but of which arrangement is most effective in given circumstances.

Jim Hansen’s program seems to me to offer a solid basis for organizing a movement that unites left-greens and green-lefts to challenge the corporate polluters today, but it isn’t carved in stone. I firmly expect that major and minor changes will be required as our “exit strategy” is tested in our common fight to liberate humanity and save the earth.

Mike, thank you again for writing. Open discussion, questioning and debate is an essential part of movement building, and I look forward to much more.

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Ian

More from my notebook …