James Pethokoukis

Politics and policy from inside Washington

Cap-and-dividend instead of cap-and-trade?

December 14, 2009

The cap-and-trade approach to limiting climate emissions does not seem to be going anywhere in the Senate. But a more-populist bill introduced by Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine) might be another option. Its goal is to cut emissions 20 percent by 2020 and 83 percent by 2050. Key difference with the existing cap-and-trade approach (via The Hill):

1) Wall Street may be particularly disappointed in the new bill. The Cantwell-Collins bill, known as the Carbon Limits and Energy for America’s Renewal (CLEAR) act, would restrict trading in a new carbon market to entities regulated by the act, a move that may have more populist appeal. … Banks like Goldman Sachs that looked forward to new profits under the giant secondary trading market created under economy-wide cap-and-trade legislation are unlikely to get on board, however.

2)  It would require fuel producers, rather than fuel users like electric utilities, to hold credits. The credits all would be sold at an auction. The cap-and-trade bills Congress has considered would distribute emissions allowances for free during the initial phase of the program in order to keep energy prices from rising too quickly.

3) Under Cantwell-Collins, revenues from the auction would largely go back to low- and middle-income households to offset higher energy costs the new carbon regulations are intended to cause. An average family of four would receive $1,100 annually in rebates, according to Cantwell’s office. In total, 75 percent of the auction proceeds would be returned to low- and middle-income households. The remainder would be distributed to a clean energy investment trust fund.

Me:  This cap-and-dividend approach has been called “100-75-25-0” policy: 100 percent of the permits are auctioned, 75 percent of the revenue is returned as dividends, 25 percent of the revenue is invested and zero offsets are allowed.

Comments

We agree on something!! Now show us where the Republican politicians (not a think tank somewhere) other than the Maine outliers are actually behind the initiative.

Posted by Chi Democrat | Report as abusive
 

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