U.S. Senate may scrap Cap and Trade in exchange for Cap and Dividend

I may have spoke too soon the other day. It seems that a few Republicans in the Senate are not only on board with Cap and Trade but could be willing to support a Cap and Dividend model as the centerpiece of the climate change legislation that the House of Representatives passed last year. I've been a fan of Cap and Dividend since I read about the concept in a few publications and blogs.

The key difference between Cap and Dividend and Cap and Trade is that the revenues that are raised through the auctioning of permits, which would allow businesses to emit a certain level of greenhouse gases, would be paid out in the form of dividends to American citizens, whereas in a Cap and Trade system the revenues go to the Federal Government, where they are supposed to be used to fund renewable energy projects. The problem, as we have seen with many of these types of government programs, is that legislators seems to always find away to use the money for something other than its intended purpose (in Allegheny County you have Dan Onorato trying to use tax revenues intended for public transit or air quality improvements to build roads).

When it comes to Cap and Trade or Carbon Taxes, many Americans have a legitimate concern (and for once, Republicans have a valid argument against Democratic legislation) that utilities would pass on any increased costs in the form of a new tax or fee on their utility bills. The utilities are almost guaranteed to pass these costs on to us, which is why a Cap and Dividend is the way to go. The dividends that are paid out to citizens would in essence offset any taxes or rate hikes on our utility bills. A bonus of the Cap and Dividend is that it acts as an incentive to consumers to reduce their electricity consumption, since a lower utility bill would mean they would have more of the dividend to keep for themselves.

This past December Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) unveiled the CLEAR (Carbon Limits and Energy for America’s Renewal) Act. Which, at only 39 pages, is much simpler and clear cut than the Waxman-Markley climate bill that was passed last summer.

CLEAR is a “100-75-25-0” policy:

• 100% of the permits to bring fossil carbon into the U.S. economy will be auctioned from day one – there are no permit giveaways.
• 75% of the auction revenue is returned directly to the public as equal per person dividends.
• 25% of the auction revenue is devoted to investments in energy efficiency, clean energy, adaptation to climate change, and assistance for sectors hurt by the transition from the fossil-fueled economy.
• Zero offsets are allowed: polluters cannot avoid curbing use of fossil fuels by paying someone else to ostensibly clean up after them.

What's not to like about that?

For more on the CLEAR act, check out Senator Cantwell's website.

For more on Cap and Dividend read Scientific American's Cap and Dividend, not Trade: Making Polluters Pay