(This post was researched and co-authored by CTC volunteer Diane Englander.)

A prominent Minnesota politician is hitching her candidacy for governor to a carbon dividend plan designed to reduce climate-damaging emissions and create jobs in clean energy.

State Auditor Rebecca Otto unveiled her Minnesota-Powered Clean Energy Plan on Sept. 20. The landing page of her gubernatorial campaign website depicts her on a rooftop driving home a solar inverter with a socket wrench. “Rebecca Otto walks the talk,” the page proclaims, urging voters to elect “a Governor who will actually do something about climate change.”

State auditor Otto hopes that, as governor, she can solarize Minnesota more than one roof at a time.

Otto’s plan is centered on a carbon charge that would begin at $40 per metric ton of CO2 and increase by 10% each year — a trajectory steep enough to cut carbon emissions by almost 30 percent (below 2005 levels) within a decade if applied nationally, according to CTC’s carbon tax model (Excel file), though not as much if applied only in a single state.

Three-fourths of the carbon revenues from Otto’s proposal would fund “Quarterly Clean Energy Cash Dividends” that Otto estimates will pay $600 a year to every Minnesota resident, with the dividend growing in tandem with the rising carbon price. The remaining 25% of the new revenue would fund “Clean Energy Refundable Tax Credits” for up to 30% of the cost of household energy-efficiency investments including electric cars, solar panels, triple-pane windows and insulation, and heat pumps.

The tax credits will “create tens of thousands of good-paying new private-sector jobs — often paying more than $80,000 per year — in every community across Minnesota,” Otto says, with “the work able to be financed with no money down” in many cases.

The 54-year-old Otto is one of six aspirants to the nomination of the state Democratic-Farmer-Labor Party, as the Minnesota Democratic Party organization has been known since the 1940s. Others include a U.S. Representative and the Mayor of St. Paul. Local newspapers suggest as many as a dozen Republicans may also contend to replace Gov. Mark Dayton, the two-term incumbent who is not seeking re-election. The race is viewed as “wide open” by Carleton College political scientist Steven Schier.

An Illinois native who now lives in the small town of Marine on St. Croix, northeast of the Twin Cities, Otto is serving her third consecutive four-term as state auditor. In 2006 she handily defeated the incumbent Republican, then won by a squeaker in 2010, becoming the only Democrat ever re-elected to the office. In her 2014 re-election she won by her widest margin to date, outpacing Gov. Dayton by six percentage points.

Otto’s plan is a variant of the fee and dividend approach espoused by the non-partisan Citizens’ Climate Lobby and, more recently, the Republican-leaning Climate Leadership Council. It charges fossil fuel providers a fee pegged to their fuels’ carbon content and returns revenues to households as equal “dividends.” Her 25% allocation to clean energy tax credits can be seen as a pragmatic concession to business and job concerns that invariably arise in state-level carbon-pricing campaigning.

Otto is arguably the highest-profile U.S. political candidate to attach a campaign to an explicit and transparent price on carbon. She says that her 11 years as state auditor have taught her that Minnesotans want economic opportunity along with solutions to pressing problems such as climate change. She also views her program as a counterweight to “fossil fuel interests [that] spend billions to control our democracy and sow doubt and confusion [to] protect their profits at the expense of Americans.”

One of several tables from candidate Otto’s Web site deriving net benefits from her carbon dividend proposal.

Minnesota has a history of seeking to address climate change. In the 1990s, state activists including the St. Paul-based Institute for Local Self-Reliance mounted a campaign for a billion-dollar state “tax shift” to reduce income and property taxes by taxing energy and fuels. While their proposal didn’t make it into law, it laid the groundwork for later carbon tax efforts. Since 1993 the Minnesota legislature has required the state Public Utilities Commission to incorporate air pollution costs into decision-making on power plants. In July the PUC ordered this “shadow price” raised to a range of $9.05 to $43.06 per short ton of CO2 by 2020. (Utility Dive gives details and explains the wide range.)

Otto’s plan would go much further, of course, embedding actual carbon costs in fuel and electricity prices and perhaps igniting a spark among the other 49 states. In an article this week for Scientific American, States Can Lead the Way on Climate Change, Otto wrote that “If other state leaders adopt similar proposals, the 2018 midterm elections could become a watershed moment when America seizes on a new state-level approach to tackling climate change and finally begins to steer the Titanic away from the iceberg.”

At a minimum, Otto’s campaign ensures that not just climate change but the idea of actually charging for carbon emissions will be front and center in next year’s Minnesota gubernatorial race. If she wins, however, her proposal still faces two potential hurdles: the state legislature and the Minnesota state constitution, whose Article 14, Section 10 could be interpreted as requiring that “excise taxes” on gasoline be paid into the state’s highway distribution fund (see discussion in CTC’s report, Opportunities for Carbon Taxing at the State Level, pp 91-92). However, if the carbon price is construed otherwise, e.g., as a fee, Otto’s proposal could be in the clear.

Carbon taxing isn’t something you expect to see mentioned in What Happened, Hillary Clinton’s memoir about losing the 2016 election to Donald Trump. But deep in the book’s weeds we find a telling new window into how Clinton “blew the biggest slam dunk in the history of American politics” (as one political pro vented to New Yorker editor David Remnick; expletive deleted here).

Around p. 240* Clinton brings up carbon dividends — a form of carbon taxes — as the type of “bold, creative ideas” she says Democrats must offer Americans. She generously name-checks Peter Barnes, an avatar of carbon dividends, and points to Alaska’s “Permanent Fund” that annually divvies up North Slope oil royalties equally to all state households. Then she writes:

[S]ome Republican elder statesmen such as former U.S. Treasury Secretaries James Baker and Hank Paulson recently proposed a nationwide carbon dividend program that would tax fossil fuel use and refund all the money directly to every American … Under such a plan, working families with small carbon footprints could end up with a big boost in their incomes. [Bill and I] spent weeks working with our policy team to see if it could be viable enough to include in my campaign … Unfortunately, we couldn’t make the math work without imposing new costs on upper-middle-class families, which I had pledged not to do. (emphasis added)

Like so much with Clinton, this passage is strong on details and weak on vision.

Clinton name-checked this book in her memoir but wouldn’t campaign on its ideas.

Clinton is right that carbon dividend schemes will raise incomes of most working families. She is right that their gain will come at the expense of affluent families, whose carbon footprints are larger. Revenue distribution from a fixed revenue pie is, by its nature, zero-sum: what is disbursed to one class of recipients can’t be available to another.

Of course, any policy that transfers wealth from rich to poor is by definition income-progressive, which puts carbon dividends squarely in the Democratic Party tradition of Roosevelt, Truman and Johnson. Climate benefits aside, carbon dividends’ distributional benefits make the policy a natural for progressives, as we pointed out last week in our post, The climate solution that boosts income for over 60% of Americans — the ones who most need it.

But did Clinton’s policy team really “spend weeks” searching for the carbon-revenue equivalent of a perpetual motion machine — one that would diminish inequality without costing “affluent families” a dime? Doubtful. The impossibility would have been obvious in fifteen minutes, especially to her policy-smart husband. Besides, carbon dividends didn’t suddenly originate with James Baker et al.; they’ve been a staple of carbon tax advocacy for nearly a decade. Their distributional impacts are well-established.

What’s more likely, and as Clinton herself hints, is that her team spent weeks trying to find the messaging to sell carbon dividends to her upper-middle-class base. But that should have been easy as well; their message could have gone like this:

Carbon dividends are a policy we can put in place quickly to accelerate our country’s transition from climate-killing, health-killing fossil fuels, with no new administrative machinery, which the rest of the world can emulate. Those who are doing well will have to contribute more for the common good, but this is a way of making every American feel more connected to our country and to one another — part of something bigger than ourselves. (Bold section are Clinton’s own words, from the discussion of carbon dividends in her book; prior text is mine.)

Yes, Trump and his backers would have pilloried Clinton for backing a carbon tax. But she was being hounded anyway for a hundred other reasons, both real and ginned up. Why not take a stand? Indeed, why not take a page from Bernie Sanders’ primary campaign playbook? In his April 14, 2016 debate with Clinton, for example, Sen. Sanders unapologetically supported “a tax on carbon so that we can transit away from fossil fuel to energy efficiency and sustainable energy at the level and speed we need to do.”

Watching that debate, I imagined Americans who were tepid or worse on carbon taxing nonetheless admiring Sanders’ forthrightness. Some might even have been swept up with a new openness to the idea of carbon taxing.

To be clear, failure to back carbon taxing isn’t why Hillary Clinton lost last November. But her inability to stand for something bold like carbon dividends was indicative of her incapacity to transcend policy details and connect them to a larger vision. And that arguably cost her the election every bit as much as  Comey, Russia and the other usual suspects.

* Page number from “What Happened” is approximate, as viewed on a Kindle. The conception and shape of this post benefited greatly from CTC supporter and blog contributor Rachael Sotos. Note that our original headline, “Hillary Clinton and the Missing Carbon Dividends,” has been changed.