Cantwell's Cap and Dividend Gambit  

Posted by Big Gav in , ,

I'll never be convinced that any sort of carbon trading scheme will be as effective as a straight carbon tax and compensating tax deductions / welfare payments for everyone, but I think Senator Cantwell is moving in the right direction with her latest proposal. The Economist reports - A refreshing dose of honesty.

On January 28th, America formally pledged to the UN that it would reduce its greenhouse-gas emissions by 17% (from what they were in 2005) by 2020. But there was a planet-sized catch. Meeting the target will depend on getting a climate bill through Congress, and that will be horribly hard. A bill to erect a cap-and-trade system to curb carbon-dioxide emissions squeaked through the House of Representatives last summer. But similar bills have stalled in the Senate, where nearly anything big needs a supermajority to pass.

Various obstacles block the way. First, Barack Obama has not yet decided what to do about health care, and he cannot wage two domestic wars at once. Second, cap-and-trade is a tough sell. An increasing number of Americans, like Mr Shimkus, doubt the science. The proportion who believe there is “solid evidence” that the earth is warming fell from 71% in 2008 to 57% last year. Among Republicans, disbelief is the norm: only 35% think there is solid evidence of warming, according to a Pew poll. The news that some climate scientists tried to muzzle dissenting voices has spread like the common cold on conservative blogs, fuelling widespread suspicion that global warming is an elaborate hoax. Many climate sceptics are furious. “My Carbon Footprint Will Fit Nicely in Your Liberal Ass,” reads a typical T-shirt. Even among Americans who believe in global warming, there is little appetite for tackling it. A hefty 85% told Gallup that the government should place a higher priority on fixing the economy, with only 12% saying the opposite.

Enter Maria Cantwell, the junior senator from Washington state. She is pushing a simpler, more voter-friendly version of cap-and-trade, called “cap-and-dividend”. Under her bill, the government would impose a ceiling on carbon emissions each year. Producers and importers of fossil fuels will have to buy permits. The permits would be auctioned, raising vast sums of money. Most of that money would be divided evenly among all Americans. The bill would raise energy prices, of course, and therefore the price of everything that requires energy to make or distribute. But a family of four would receive perhaps $1000 a year, which would more than make up for it, reckons Ms Cantwell. Cap-and-dividend would set a price on carbon, thus giving Americans a powerful incentive to burn less dirty fuel. It would also raise the rewards for investing in clean energy. And it would leave all but the richest 20% of Americans—who use the most energy—materially better off, she says.

Ms Cantwell’s bill is refreshingly simple. At a mere 40 pages, it is one-thirty-sixth as long as the monstrous House bill (known as “Waxman-Markey”, after its sponsors), which would regulate everything from televisions to “bottle-type water dispensers” and is completely incomprehensible to a layman. Instead of auctioning permits to emit, Waxman-Markey gives 85% of them away, at least at first. This is staggeringly inefficient: permits would go to those with political clout rather than those who value them most. No one is proud of this—Mr Obama wanted a 100% auction—but House Democrats decided that the only way to pass the bill was to hand out billions of dollars of goodies to groups that might otherwise oppose it. (There was plenty of pork left over for its supporters, too.) ...

Of all the bills that would put a price on carbon, cap-and-dividend seems the most promising. (A carbon tax would be best of all, but has no chance of passing.) Ms Cantwell has a Republican co-sponsor, Susan Collins of Maine, and says she is hearing positive noises from a few other Republicans, such as Lisa Murkowski of Alaska. The most attractive thing about the bill is that it is honest. To discourage the use of dirty energy, it says, it has to be more expensive. To make up for that, here’s a thousand bucks.


But what is to stop people spending the dividend on SUVs? Cap and trade keeps the funding for renewable only, and does not risk it

Nothing stops them - but running the SUV becomes more expensive compared to alternatives, which over time motivates people to adopt more fuel efficient alternatives.

Cap and trade doesn't stop them doing anything either unless the cap reduces to zero over time (and during that period has the same effect - by increasing the price of fuel).

RE: "I'll never be convinced that any sort of carbon trading scheme will be
as effective as a straight carbon tax and compensating tax deductions / welfare
payments for everyone,"

Amen ;-)

Nearly every (longterm) expert I have met in this field agrees.

Including the guy who invested it ;-)

NYT- Cap&Trade Quote:

"If you liked what Enron, AIG, and the Federal Reserve did to the economy,
you'll love cap and trade."

carbonsink   says 6:44 PM

Gav what's your opinion on Hansen's fee and dividend idea?

Hansen's fee and dividend scheme sounds the same as a carbon tax with compensating tax deductions / welfare payments to me - same thing, different name (ie. I totally approve of it).

carbonsink   says 12:40 PM

Except the carbon is taxed at the mine or port, not when its emitted, so this scheme wouldn't help CCS become economic. It also doesn't offer any incentive for tree planting or to stop deforestation.

Apart from that I love the simplicity of it. Tax carbon at $20/tonne, and distribute the dividends equally between every man, woman and child. That's the kind of climate policy I reckon the punters might go for.

True - nice and simple and fewer chances for carpetbaggers to attach themselves to it.

"so this scheme wouldn't help CCS become economic."

Will it ever be economic?

While I generally think that all techs should be given a go... I am skeptical of CCS.

Not all tech solutions will be viable and the evidence and projections for CCS are nowhere glowing. CCS - coals fusion solution.

Maybe that's why Hansen proposed his version. To avoid a pointless dead end?

Planting trees alone is just not going to do it. The wiggle (ie trees) on the ever increasing Keeling curve kinda shows that.

Well - there's always the "genetically engineered mutant tree-lichen hybrid that devours carbon dioxide" idea :-)

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