Cap & Dividend: A Clear Winner

A new bipartisan climate bill offers a much smarter way to cut emissions—auction off pollution permits and distribute the proceeds to everyone.

Posted by Sarah van Gelder at Dec 11, 2009 03:50 PM |

December 11, 2009. Senator Maria Cantwell (D-WA) introduced a bill today that is a much better approach to reducing climate change than the cap and trade bill circulating in the Senate. Her bill, which she co-sponsored with Senator  Susan Collins (R-ME), uses cap and dividend to reduce climate emissions and avoids the pitfalls and boom-and-bust cycles inherent in carbon trading. (Peter Barnes proposed this idea in YES! Magazine in 2001). 

Why is this a better idea?

First, polluters would pay for the right to pollute; they would buy carbon emissions permits at an auction, instead of getting the majority of them for free. This sends the right market signal—emit carbon, and you'll have to pay.

Carbon permits would be required at the point where fossil fuel energy enters the economy. The number of greenhouse gas emissions allowances is reduced regularly by amounts that businesses can plan for. There are no offsets—these would be real reductions in climate changing emissions.

Second, American families strained by the poor economy would benefit. Each person would get an equal share of the proceeds from the auction. It works like the oil trust funds in Alaska, where each resident gets about $1,300 per year for their share of the state's oil royalties. As long as our economy remains dependent on fossil fuels, prices for energy and energy-intensive products will rise. But the rebate will offset those price increases—Cantwell says it will mean most families are in about the same place financially. Those who buy carbon-free energy, drive energy efficient cars, or buy products produced locally with little fossil fuels will come out ahead, though, while those who drive gas guzzlers will pay more through the higher price of fuel. So it sends the right signal to consumers, too.

Politically, it should go over much better than cap and trade. Who wouldn't like to get a check in the mail each month that represents your share of the carbon auction revenues? Three quarters of the revenues would be distributed equally to all Americans. The other quarter will go to clean energy research and development, for projects that reduce non-CO2 greenhouse gas emissions, and for aid to communities and workers who need special help making the transition to a clean energy economy.

And here's the frosting on the cake. Instead of cap and trade, which would set up a massive Wall Street system of buying and selling carbon, this auction is for energy producers and importers, only—not brokers and speculators.

What's not to like? This is a far better proposal than the cap and trade proposals that has Wall Street salivating. One caveat, though. Carbon reductions proposed in the bill are probably not enough to avert dangerous climate change. But if there is flexibility to step up the reductions as the science get firmer and the public backing grows, this approach could be just right.



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