Universal Basic Dividend - your questions answered

What is UBD, and why do we need it now? Find out more about why we propose a UBD to target inequality, increase economic security, and conserve our natural resources for the benefit of all. 

Universal Basic Dividend (UBD) is a way of making regular payments to all citizens from revenue raised by charging fees for the use and exploitation of common resources.

UBD would redistribute a portion of the excess wealth generated by the use and exploitation of the commons to each and every one of a country’s citizens. Companies that pollute the commons, extract natural resources, or earn rents on financial assets, would pay fees from their profits into a country’s Citizen’s Fund. This fund would then distribute equal payments to all citizens in the form of a dividend – the right of every citizen as a co-owner of the commons. It is not means tested or dependent upon government funds. 

Besides redistributing income to citizens as co-owners, this regular payout would, at the right level, provide essential individual economic security. Such security would likely reduce social tensions, especially during periods of disruption, and encourage the creativity, innovation, and entrepreneurship needed to design the societies of the future. 

The commons are the shared inheritance of humanity: natural and social resources like the air we breathe, oceans and forests, ideas and information.

They have not been created by one person or corporation, but over time, they have been enclosed or privatised, making big profits for those that own and use them. The exploitation of the commons, however, impacts everyone: a company that emits greenhouse gases makes a profit, but we all suffer the consequences of pollution and global warming. These consequences are known as negative externalities. Historically, companies have not factored these externalities into their balance sheets.

A Universal Basic Dividend means companies start paying the true cost of resource use. It compensates citizens for the enclosure of common goods, and can also incentivise their good, sustainable use by pushing up the cost of exploiting them.

A UBD is a mechanism to redistribute the world’s wealth more fairly, supporting the giant leap towards a more equal and resilient society, as well as driving down emissions by reducing the incentive to pollute or over-exploit the commons.

It’s also a necessity as the world is changing. We’re living in a time of shocks and crises: war, deepening inequality, the emergence of AI and its impact on the workforce, rising energy and food prices. The bold action we need to change course – by implementing Earth4All’s five extraordinary turnarounds – will inevitably be disruptive. We need to ensure we are prepared. As well as being the right of every citizen, UBD via a Citizen’s Fund can help mitigate some of the impacts of the changes ahead.

Of course, UBD alone can’t fix inequality and create a more resilient society. It must be implemented as part of a larger plan to build societies that are more resilient to shocks, including redistribution of wealth, progressive taxation, and the empowerment of workers.

Unlike other proposed universal income schemes, the Universal Basic Dividend wouldn’t be funded by extra taxes and government spending. Rather, it would operate under a fee and dividend model: companies would pay a fee from the economic rents they make from using common resources, and these fees would be channelled into a Citizen’s Fund. This fund would either distribute this revenue directly as an equal dividend payment to all citizens, or – more likely – make investments in the sustainable transition we need and pay out dividends from this. This safeguards the dividend even if the original resource is depleted or can no longer be used (such as fossil fuels).

The exact amount of the dividend would depend on a range of factors, including which common resources are included in the fee-for-use system. It has been suggested that a fee on carbon, financial transactions, and intellectual property could pay $5000 per year to each American citizen. In 2021, the Alaska Permanent Fund, funded by oil and mining revenues, paid out $1114 per person, meaning that a family of four received $4456. Ultimately, the sum will be a matter for national governments to decide, but the benefits – lifting citizens out of poverty, an increase in public trust, a boost for innovation and entrepreneurship – should be powerful incentives to set it at a fair level.

The commons belong to all citizens equally, but in the current system, only the few reap the biggest rewards from their use. The universal nature of the dividend recognises the equal rights of all citizens to those rewards. It is not means tested, because receiving it is your right as a citizen. This is also why channelling it through a Citizen’s Fund is suggested: it is not part of government’s discretionary revenue

Furthermore, as we undertake the major transformations required to ensure wellbeing and prosperity for all, the measures we adopt along the way must bring everyone in society on board to ensure broad support. The universal nature of the dividend means that everybody benefits, making it a politically feasible solution.

A fee for use would better reflect the real cost of using resources, and the dividend would compensate those least responsible for this use. Although it’s likely that companies would pass on some the increased costs of polluting and resource use to their customers, the wealthiest would be hit the hardest as they are by far the biggest source of emissions. The least well off would stand to benefit the most, and factoring in the regular dividend payments, most people would come out ahead – as this study in the USA demonstrated.

UBD can be seen as a kind of Universal Basic Income (UBI), with some key differences. The unique proposal of UBD is that it is not funded through taxation, but through a fee/dividend approach: collecting a proportion of the surplus generated from exploiting and controlling selected commons and distributing to citizens as co-owners. It also differs from UBI in its mechanism for distribution: the idea of a Citizen’s Fund ensures that the payments bypass government, protecting the fund from misuse and undue political influence.

No. Studies show that that unconditional cash transfers don’t make recipients unwilling to work. They do, however, reduce anxiety and overwork, and allow recipients to take on more unremunerated labour like childcare. UBD might also mean that individuals would not be forced to take jobs with exploitative conditions.

Furthermore, at the level that current estimates suggest, it is unlikely that a UBD would be a replacement for a regular income. It would be enough, however, to make a significant contribution to an individual’s economic security and their ability to undertake entrepreneurial ventures or further training.

The most prominent example of a Universal Basic Dividend is the case of the Alaska Permanent Fund, set up to ensure that the state’s resources would benefit future generations when they were depleted. Since 1976, the Fund has collected a share of revenues from companies extracting the state’s natural resources and paid a dividend to all citizens, adults and children alike, typically ranging from $1000 to $2000 per person every year. The Fund is popular and seen as a matter of economic justice and inclusion of all citizens. Other schemes trialling forms of universal basic income through unconditional cash transfers have demonstrated multiple positive effects in the areas of welfare, equity, economic growth, empowerment, and sociological gains. The results of these schemes are laid out in detail in Unconditional cash transfers and the five turnarounds: beneficiaries’ perspectives.
While still seen by some as a radical proposal, UBD is not without considerable and broad-based support. The world’s most successful example of a UBD-like programme, the Alaska Permanent Fund, was initiated by the State’s Republican party. Proposals to expand such a scheme have received bipartisan support in the United States, such as the Baker-Shulz Carbon Dividends Plan, a fee/dividend proposal that was supported by over 3000 economists including 28 Nobel laureates and four former chairs of the federal reserve. And similar schemes such as unconditional cash transfer trials have been successfully implemented worldwide – see our deep-dive paper for more.
Earth4All has produced three deep-dive papers exploring aspects of UBD, led by Ken Webster: Further key references on UBD include:
  • Peter Barnes, With Liberty and Dividends for All
  • James K Boyce, The Case for Carbon Dividends

The Alaska Permanent Fund

Discover one of the most powerful examples of UBD in practice

Deep-dive paper

Read Ken Webster’s deep-dive on UBD, The Long Road to a Social Dividend.