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New Climate Bill to Send Polluter-Pay Rebates to American Families

by David Sassoon - Apr 3rd, 2009

Rep. Chris Van Hollen of Maryland introduced a climate bill this week that received little notice, but the formula it provides for capping carbon offers a useful strategy for winning broad public support: Make polluters pay fees for carbon emissions and rebate the revenue to American families.

It is called the The Cap and Dividend Act of 2009, and it is an astonishingly simple piece of legislation – a mere 20 pages long.
The reason this little bill might end up punching above its weight is because it speaks loudly where the 648-page climate bill introduced the day before by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) remains silent: on the question of carbon credit auctions and allocations.

Van Hollen wants to auction 100% of the permits that companies will need in order to release carbon into the atmosphere – in other words, no free giveaways to polluters, despite their demands.
He also wants to return 100% of the auction revenues equally to every American resident with a social security number. That's the "dividend" in the bill's title – also sometimes referred to as "cash back" or "rebate."

His bill echoes President Obama's thoughts on cap and trade as well. The president wants a program that controls emissions, auctions 100% of the permits and returns most of the revenues to working families. Peter Orszag, the president's budget director, explained succinctly why a 100% auction is necessary:

To give away the permits instead would be "the largest corporate welfare program that has ever been enacted in the history of the United States."

As for rebates, the president has called for distributing the revenue by extending the Making Work Pay tax credit, which applies to 95% of working Americans.

Van Hollen's bill will be taken up by the House Ways and Means Committee, chaired by Rep. Charles Rangel (D-N.Y.), who spoke to SolveClimate briefly last month about the need to cushion consumers from rising energy prices (see video). The question of revenues from a cap is a matter that falls squarely within the jurisdiction of his committee, and outside the jurisdiction of the House Energy and Commerce Committee, where the Waxman-Markey bill originated.

The Van Hollen bill in some form could be integrated into the final comprehensive climate package now being constructed through the intricate process of lawmaking in the House.

Insiders do not expect it to emerge from Rangel's committee unchanged. The expectation is that Van Hollen's legislation will end up proposing less than a 100% rebate. Some of the proceeds from the sale of revenues could be put to other purposes – such as investments in clean energy, energy efficiency measures and international climate assistance – while still protecting consumers from rising prices.

The bill was backed by 10 regional environmental organizations which issued a statement of support, saying, in part:
No other carbon cap proposal does as much to help American families, our economy, and our planet.

The largest and best known environmental groups remain largely skeptical of the Cap and Dividend approach and are most deeply engaged with the Waxman-Markey bill, known as the American Clean Energy and Security Act of 2009, or ACES. However, supporters of Van Hollen's bill say it is not intended to be competing climate legislation.

The House leadership left specific prescription for auctions and allocations out of the ACES bill, instead preferring to work out an appropriate formula through the legislative process. The Van Hollen bill is the first to break the silence. The bill could not have been introduced without the blessing of Speaker Nancy Pelosi, with whom Van Hollen works closely both as chair of the Democratic Congressional Campaign Committee and co-chair of the House Renewable Energy Caucus.

Since the introduction of the ACES bill, Republican opponents around the country have launched a massive and disciplined opposition campaign, labeling the measure as a giant new tax. Most commonly, they're labeling it "Cap and Tax", and in another formulation calling it the "light switch tax" – trying to convince consumers that they will have to start paying for doing the things everyone now takes for granted.

The Van Hollen bill has the potential to help flip the messaging war on its head by reaching consumers with the idea of a Cap and Rebate – the precise opposite of the way climate law is being attacked.
Under Van Hollen's formulation, polluters will be paying consumers for the privilege of using the atmosphere as a dumping ground for global warming pollution. It provides the blueprint for a potential messaging jujitsu that, with the help of the president's oratorical skills, could turn the tables on opponents of climate law.

Van Hollen's bill also seeks to simplify the imposition of a carbon cap. In less than eight pages, it calls for the imposition of an "upstream cap" placed on the first sellers of oil, natural gas and coal – about 2,000 companies that would be required to buy the carbon permits. It seeks to regulate carbon at the point where it enters the economy, rather than where it emerges from smokestacks. The ACES bill needs more than 100 pages to explain a variety of cost containment mechanisms and the complex rules for capping carbon from tens of thousands of companies that emit carbon dioxide.

Original co-sponsors of the Cap and Dividend Act of 2009 include Reps. Mike Thompson (D-Calif.), Earl Blumenauer (D-Ore.) and Lloyd Doggett (D-Texas). Observers say a cap and dividend bill is also in the works on the Senate side, being worked on by Sens. Diane Feinstein (D-Calif.) and Maria Cantwell (D-Wash.).

How a Carbon Permit System Could Work


By Tom Curry
National affairs writer
updated 6:31 a.m. CT, Thurs., Feb. 26, 2009

As envisioned by President Barack Obama’s budget proposal unveiled Thursday, the federal government will soon begin tapping into a huge new source of revenue by requiring companies to pay for the permission to emit so-called greenhouse gasses linked to global warming.

The Obama budget blueprint assumes that by 2012, the Treasury will be collecting $78.6 billion in new revenue from carbon emissions permits. From 2012 to 2019, it envisions that a total of $645.7 billion would be raised from auctioning of such emission allowances.

Obama proposes using about 80 percent of that anticipated revenue — or $526 billion — to pay for tax credits for low- and middle-income people to help offset higher energy costs. The rest of the money would subsidize alternative energy projects and firms...

An idea that seems to be gaining momentum is one offered by a leading House Democrat, Rep. Chris Van Hollen of Maryland, who also is assistant to House Speaker Nancy Pelosi. This week Van Hollen introduced a bill that would return 90 percent of the proceeds of the emissions permit auctions to consumers — a concept called “cap and dividend.”

“The strength of cap and dividend lies in its simplicity, transparency and durability,” he said in a letter to fellow House members recruiting their support for his bill.

'Cap and Dividend, Not Trade': Scientific American

"The new President and Congress will have one chance to turn the tide on climate change," Peter Barnes writes in Scientific American. "Modest measures won't be enough. We need to install an economy-wide system that ratchets down carbon emissions, spurs investment in clean energy alternatives and simultaneously protects household incomes."

Bill McKibben interviews Barnes in Forbes

"The Congressional Budget Office estimates that auctioning permits will raise between $100 billion and $300 billion a year... At $300 billion, that's $1,000 per man, woman and child."

Bloomberg calls for revenue-neutral carbon price

New York Mayor Michael Bloomberg has urged Congress “to place an ‘upstream’ price on carbon,” auction 100% of the permits and return 100% of the revenue to consumers. “If Washington treats carbon revenue like a piñata, Americans will be justifiably repelled, and the cause of reducing our dependence on fossil fuels will be tragically set back.”

Is Palin's plan a precedent?

GOP vice-presidential candidate Sarah Palin may not understand the causes of climate change, but she does know that higher energy prices make voters angry. So she imposed a steep windfall profit tax on Alaska oil companies and returned the proceeds to all Alaskans in the form of a $1,200 dividend.

Washington Post endorses 'cap and return'

Congress can fight the recession and global warming simultaneously, says the Post. The way to do that is to cap emissions, auction 100% of the permits, and “return to the American people every penny of the trillions of dollars expected to be generated by these sales.”

On global warming, McCain and Obama agree: urgent action Is needed

John McCain and Barack Obama both say that the Bush administration's policies on global warming have been far too weak.

Britain's worst polluters set for windfall of millions

A flagship European scheme designed to fight global warming is set to benefit companies in almost all sectors of the British economy, a Guardian investigation has revealed.

Orszag: Dividends benefit the poor

The CBO director finds that, with equal rebates, low-income families could be financially better off (Washington Post op ed).

Barnes: Protect household incomes

In a Treehugger.com interview, Peter Barnes notes that, with gas approaching $5 a gallon, any policy that raises carbon prices must also protect household incomes.

Peter Barnes explains cap and dividend

At a recent talk in Denver, Colorado, Peter Barnes explains how the cap and dividend plan would work "kind of like an economic stimulus check."

New Zealand weighs dividends

The Labour government of New Zealand is considering a number of revenue recycling mechanisms, including per capita dividends, to compensate households for higher energy costs stemming from its proposed carbon cap-and-trade system.

Northeast states set carbon auction date

The first U.S. auction of carbon emission permits will be held on September 25 by the Regional Greenhouse Gas Initiative, a consortium of ten Northeast states.

Hansen: Charge polluters, pay people

Andrew Revkin from the NY Times comments on James Hansen's recent support of a "tax and dividend" climate policy.

TIME: Trouble with Congress' green gambit

Time reporter Bryan Walsh writes, "That cap and trade may place a financial burden on ordinary Americans may be the biggest sticking point for Warner-Lieberman or whatever comes after it."

Burlington Free Press: Cap-and-dividend is feasible

Cap and dividend will protect the real incomes of the majority of Americans while curbing global warming and encouraging our shift to using better sources of energy.

US News: Q&A with Peter Barnes

"Cap-and-dividend" advocates say to tackle global warming, Uncle Sam will need to hand out money.

Bill McKibben: “A level playing field is what we need.”

In the May-June issue of Mother Jones, Bill McKibben endorses cap and dividend and concludes, “I’d give up every penny of wind and solar subsidies…if we could also kill subsidies for ‘clean coal’ and atomic energy.”

UK Guardian: Billions wasted on CDM

Recent studies suggest the Clean Development Mechanism may be fundamentally flawed.

Grist columnist backs cap and dividend

In a 3-part series on climate policy, Grist staff writer David Roberts analyzes several alternatives and concludes: cap and dividend is best.

Cap & dividend touted in Time Magazine

In its April 28 cover story, How To Win The War on Global Warming, Time touts cap and dividend as a climate solution that avoids hurting "those already struggling to heat their homes and fill their tanks."

Bill McKibben: We've passed the threshold for climate stability

Bill McKibben comments on the tipping point of our atmosphe

Andrew Revkin, N.Y. Times

Interviews Peter Barnes on cap and dividend.

The Natural Patriot reviews Climate Solutions

After we've swapped out the bulbs, how can we make more than symbolic progress towards getting global climate change in check?

Rebecca Tuhus-Dubrow, Boston Globe

"A proposal known as 'cap and share' is under consideration by the Irish government."

Mark Lynas, New Statesman

"Cap and share is a way of upping the price of fossil fuels and recycling the money to citizens."

Fran Korten, Yes! Magazine

"Don’t give away the sky."

Friends of the Earth

"The Lieberman-Warner bill will give up to a trillion dollars to the fossil fuel industry."

Tom Friedman, N.Y. Times

“Without a price signal — a carbon tax or a cap-and-trade system — to make it profitable to invest enormous sums, long term, in new clean technologies, it will not happen at scale.”

Keith Johnson, Wall Street Journal

“McCain would allocate a big chunk of emissions permits to industry for free.”

Green Taxes

Throughout the world, only 5.6% of tax revenue comes from environment-related fees.

Peter Barnes speaks at the SF Commonwealth Club (video)

55-minute talk on the case for cap and dividend.


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