Muckraker: Grist on Politics

Fans of carbon-pricing schemes that would return the vast majority of tax or carbon auction revenue to consumers think there’s increasing political momentum for their proposals in Congress these days.

Proponents of cap-and-dividend — a carbon-pricing plan that would auction off pollution credits to industries and send roughly 90 percent of the resulting revenue to the public in the form of rebates — have been bolstered in the past days both by the president’s budget plan and a proposal from Rep. Chris Van Hollen (D-Md.) in the House.

Van Hollen’s “Cap and Dividend Act of 2009,” due out next week, would put a cap on carbon emissions in 2012, and aim to reduce emissions at least 80 percent by 2050. According to a letter he addressed to colleagues in the House on Wednesday, all pollution permits under the cap would be auctioned, and they would be available to “upstream” industries — that is, the first sellers of fossil fuels, like oil refineries and coal mines. He says that at least 90 percent of the total auction proceeds would be returned in the form of a flat rebate to “every American with a Social Security number.”

“At its core, any successful climate change bill must deliver scientifically based emissions reductions while enjoying broad popular support from the American people — and it must continue to do both for at least forty years,” said Van Hollen in his letter. “In that regard, I believe there is one approach that offers the best chance to get the job done: Cap and Dividend.”

Peter Barnes, arguably the country’s leading proponent of cap-and-dividend and a familiar name on Gristmill, called Van Hollen’s bill “beautiful.”

“That’s how I think it should be done,” Barnes, who was in D.C. this week pitching the idea to other legislators, told Grist. “We’re going to rally behind the Van Hollen bill and push it as hard as we can.”

Barnes argues that the dividend method would protect both low- and middle-income Americans from energy price spikes, which he says will be particularly salient in the midst of a recession. He also thinks it’s the most politically feasible scheme for getting a price on carbon, since it curbs both the bickering over how to spend the revenues and the allegations that it will hurt the middle class.

Barnes and other proponents of that type of plan are also heartened by the president’s budget proposal, which would put over 80 percent of “climate revenues” toward tax credits, through what the Obama team is calling the “Making Work Pay” measure. The tax credit, according to the budget, would offset the payroll tax for about about 95 percent of workers. The other $15 billion from revenues would go toward investments in energy and efficiency.

George Abar, a former legislative director for Sen. John Kerry (D-Mass.) now working with a coalition supporting a cap-and-dividend plan, said he sees Obama’s budget as a positive sign that he intends to rebate a significant portion of revenues. “He has called for auctioning pollution permits, no giveaway, and he put protecting household purchasing power on the table with a plan that reaches a very large part of Americans, 95 percent of workers,” Abar told Grist.

Of course, plenty of others take issue with the idea that all the money should be refunded. The revenue could also be used to fund R&D for new technologies, transition assistance for affected workers, or efforts to reduce deforestation in the developing world, among many other things. A recent report from the Center on Budget and Policy Priorities finds that rebating 55 percent of the total allowance value could compensate the majority of low- and middle-income individuals, leaving another 45 percent for other uses. And both the Obama administration and Congressional Democratic leaders favor a cap-and-trade approach that includes a significant investment portion.

Nathaniel Keohane, director of economic policy and analysis for the Climate & Air Program at the Environmental Defense Fund, notes that Obama and Congress are going to have to determine the politically feasible balance between rebates and investments in climate legislation, however.

“The strong argument in favor of [cap-and-dividend] is that is a great way of creating a permanent constituency for that bill,” said Keohane. “You’re going to have the climate rebate checks that arrive in every household every quarter, every year. That’s going to be a very strong way of protecting the bill in the future.”

“On the other hand, there are other valid principles and valid claims out there, and other constituencies in the political process that say ‘Hey, we think there’s an important argument for allocating some of the value to technology or to transition assistance,” he continued. “I think the political feasibility test is not one I’m going to handicap right now.”

Here’s Van Hollen’s letter to fellow House members:

Dear Colleague:

I have been — and will continue to be — a supporter of leading congressional efforts to address the challenge of global climate change. The science is clear: Heat-trapping emissions that have been accumulating in our atmosphere since the Industrial Revolution are increasing global temperatures — causing glaciers to melt, sea levels to rise, oceans to acidify and weather events to intensify. Moreover, and more troubling, recent observations published since the Intergovernmental Panel on Climate Change’s 2007 Fourth Assessment Report indicate climate impacts occurring at a greater pace and to a greater degree than the IPCC’s models originally predicted. Additionally, there is no step more important to building out our clean energy future than providing markets with a strong price signal to accelerate the development and deployment of homegrown renewable energy and energy efficiency technologies. With President Obama in the White House, the time for Congress to act is now.

Climate science can be complicated. But our legislative solution to climate change need not be. At its core, any successful climate change bill must deliver scientifically based emissions reductions while enjoying broad popular support from the American people — and it must continue to do both for at least forty years.

In that regard, I believe there is one approach that offers the best chance to get the job done: Cap and Dividend.

The strength of Cap and Dividend lies in its simplicity, transparency and durability: Cap carbon emissions, auction carbon permits, require first sellers of fossil fuels to annually surrender permits equivalent to the carbon content of the fuel they sell, and distribute auction proceeds in the form of dividends to everyone with a Social Security number.

Towards that end, I will soon be introducing The Cap and Dividend Act of 2009, which will:

  • Cap carbon emissions in 2012 and establish a scientifically driven glide path to a minimum 80% reduction in carbon emissions by 2050;
  • Auction 100% of carbon permits;
  • Require first sellers of fossil fuels (i.e. oil, coal and natural gas) to surrender permits equivalent to the carbon content of the fuel they sell into the U.S. market each year; and
  • Distribute at least 90% of total auction proceeds in the form of dividends to every American with a Social Security number.

Cap and Dividend has attracted a growing chorus of support from news organizations like Newsweek and The Washington Post, as well as diverse political voices ranging from former Clinton Labor Secretary Robert Reich to Republican Tennessee Senator Bob Corker. To learn more about the Cap and Dividend approach to addressing climate change, or The Cap and Dividend Act of 2009, please contact Bill Parsons at 202-225-5341.

Sincerely,

CHRIS VAN HOLLEN
Member of Congress