The dividend is designed to keep the economy in balance, protect the vulnerable and secure the long term public support needed to address climate change. As the cost of pollution increases with the fee, recycling all the money directly to citizens means that existing products and services within the economy can be afforded.
The revenue from the fee can be split into equal shares, using 1 share per adult and 0.5 share per child for up to 2 children per household. This dividend is returned to households in the form of a monthly payment making most families better off. Increasing energy costs by Carbon Pricing on its own tends to be regressive, hitting the most vulnerable in society hardest. Recycling the money in an equal and fair way to all citizens protects poorer and middle class families more and ensures pensioners and the unemployed are reached as well. Generally wealthier people with continued larger carbon footprint lifestyles would lose out. The graphic is useful for visualising the impact on quintiles by income, comparing different forms of revenue recycling.
In 2008 British Columbia in Canada committed to a Carbon Tax with revenue recycling. Although initially a hard political sell, ultimately public support for the tax grew to circa 65%.(OECD, 2013) Communication with the public regarding the purpose of the tax and the commitment for 100% of the revenue to be returned to the public were assessed to be important factors in public support.