How to Design Carbon Dividends

45 Pages Posted: 6 Jan 2019

Date Written: December 12, 2018


A robust carbon tax would generate considerable revenue. Some carbon tax advocates have suggested returning those revenues to Americans through direct payments, often called carbon dividends. We examine how to design these dividends considering two, sometimes conflicting, principles. Carbon dividends can be viewed as shared income from a communal property right, much as Alaskans share in income from the state’s oil resources. Dividends can also be viewed as rebating the carbon tax back to consumers. These views often have different implications for designing carbon dividends. Political and practical considerations are also important. With that in mind, we propose a carbon dividend design that combines beneficial features from both the communal property and tax rebate views.

Keywords: Carbon Tax, Carbon Dividend, Climate Change

JEL Classification: H23, Q54

Suggested Citation

Marron, Donald B. and Maag, Elaine, How to Design Carbon Dividends (December 12, 2018). Available at SSRN: or

Donald B. Marron (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

Elaine Maag

Urban Institute

2100 M Street, NW
Washington, DC 20037
United States

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