The New Zealand Fee and Dividend Scheme

The New Zealand Fee and Dividend Scheme

Implement a fee and dividend scheme as a replacement for the Emissions Trading Scheme (ETS) and, significantly, as a way to implement other behaviour modification taxes (BMTs) in a revenue neutral way. The scheme would place fees on behaviours (such as carbon emissions) and would pay out most of the resulting revenues over a period (a month say) split evenly between all citizens direct to their bank accounts. Businesses would attract the fees on their inputs but would not receive payouts as they would pass the costs on to their customers. Some rebate on inputs for export might be considered in some cases (probably not carbon emissions). The scheme would not be limited to behaviours causing climate change (emission of CO2 and other greenhouse gases) though that would be its initial focus. It could and would be used for any number of other behaviours, such as the consumption of fat or sugar, or anything else as and when the need arose. The fees would be levied in the most straight forward manner possible, depending on the situation. For example, per litre of fuel at the pump or when fuel is bought and consumed in bulk by industry. Fees on sugar could be done in a corresponding way, either at retail or wholesale. The scheme would be essentially revenue neutral as almost all revenue over the long run would be paid back to citizens (and returned to the economy). The exception would be revenue retained to cover administrative costs, to build up an operating balance, and to provide for relevant research funding. The promotion, rather than the deterrence, of desirable behaviours would also be possible with a modified version of the scheme where payments were also made from the revenue pool to encourage the desirable behaviours. Negative greenhouse gas emissions (tree planting and similar) could be treated in this manner. Limited emissions trading could be layered on top of the scheme to allow positive emitters to buy emissions credits directly from certified NZ-based negative emitters. Emissions covered in that way would not attract any payments or fees from the fee and dividend scheme. A further elaboration would allow for regional sub-schemes, so that behaviours in one area could be modified independenly of other areas. The obvious example would be measures that are appropriate in Auckland but not in the rest of the country, There are two key advantages of a fee and dividend scheme over a straight behaviour modification tax. It is essentially revenue neutral, and so does not dampen the economy as a whole directly. Also, it does not increase the cost of living for people who are prepared to modify their behaviour to stay below the average (including the behaviour of businesses). If you are below the average, you make money out of the scheme.