Cap & Share in the USA
Cap & Dividend
"Cap & Dividend" (see the Other Schemes page)is very similar to Cap & Share. In fact Cap & Dividend is the same as Cap & Share, except that your share of the country’s carbon footprint doesn’t come to you in the form of a certificate (which you can then sell); instead, it is sold for you and you are given the money.
Cap & Dividend is being promoted in the USA by Peter Barnes as part of the "On the Commons" initiative. In C&D an upstream auction of permits would be run by a "Sky Trust", independent of government, and the money refunded to the people on an equal per capita basis. The Alaska Permanent Fund is a precedent for this type of approach in the USA.
Cap & Dividend is the mechanism in the CLEAR Act proposed in the Senate Bill introduced in December 2009. This has been reported approvingly by many sections of the press, including The Economist in the UK (see below).
Carbon Share
In California, Mike Sandler is promoting Carbon Share, which is essentially the same system as Cap & Share. The system is equally applicable in other States or in the USA as a whole, and can easily co-exist with Cap & Dividend. Mike would be a good first point of contact if you are interested in exploring or promoting these ideas in the USA. His contact details are on the Carbon Share website.
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The Economist supportive of Cap & Dividend
In an article in the Feb 4th 2010 edition about the CLEAR bill in the US Senate, The Economist says, "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.)"
Information on the CLEAR Act can be found here.
Here is the text of the article:
A refreshing dose of honesty
Maria Cantwell and the politics of global warming
Not long after the flood, when Noah was safely back on dry land, God promised: "Never again will I curse the ground because of man...And never again will I destroy all living creatures." The implication is clear. "Man will not destroy this earth," says John Shimkus, a Bible-reading Republican congressman from Illinois. So there is no need to worry about global warming.
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, fueling 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.)
The Senate will not pass a comprehensive climate bill any time soon. So Mr Obama is attacking the problem piece by piece, bypassing Congress. On February 3rd, he unveiled a plan to promote biofuels and a task force to study the improbable dream of "clean" coal. Last week, the Securities and Exchange Commission ordered private companies to publish estimates of the climate-related risks they face. The Environmental Protection Agency, meanwhile, is trying to regulate greenhouse gases under existing laws. But regulation is no substitute for putting a price on carbon, which would harness the power of the market to cut emissions more cheaply.
Tell it like it is
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.
This challenges the conventional wisdom in Washington, DC, that the only way to pass a global-warming bill is to disguise what's in it. Leading Democrats try to sell cap-and-trade as a way to create jobs and wean America from its addiction to foreign oil. (It's about "jobs, jobs, jobs and jobs," said Nancy Pelosi, the speaker, last year.) Focus groups say this message ought to resonate. Frank Luntz, a pollster, released a study last month showing that voters are unswayed by melting ice caps but will support an energy bill that sticks it to the Saudis and creates American jobs.
In real life, though, voters hear counter-arguments. Sure, cap-and-trade will create jobs, but it will destroy them, too. If the goal is to reduce dependence on foreign energy, why not mine more American coal? The only sound reason for acting to curb global warming is to curb global warming. Ms Cantwell does not put it so bluntly, but her bill speaks for itself.
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Article about CLEAR by Peter Barnes on Grist
Why Cantwell-Collins Is Best - And How It Just Might Win
As U.S. climate legislation creeps forward, Senators now have two frameworks to choose from. One is from Senators John Kerry, Joseph Lieberman and Lindsey Graham; the other is from Senators Maria Cantwell and Susan Collins. Both begin with descending carbon caps that, along with supplementary policies, promise to reduce carbon dioxide emissions at roughly the same rate, and both protect domestic industries by imposing fees on carbon-intensive imports from countries that don't limit emissions. But from there the two approaches diverge markedly.
The Kerry-Lieberman-Graham framework is based on the Waxman-Markey bill that narrowly passed the House. It would create a complex and opaque cap-and-trade system riddled with favors for utilities and Wall Street. Roughly 85% of the initial carbon permits would be handed free to utilities and other entities, which could sell them for cash. In theory, utilities would return much of this cash to their customers, but exactly how they would do this, along with all the monitoring and enforcement, is left to the 50 states.
Kerry-Lieberman-Graham would also create a worldwide trading system for carbon 'offsets' and other carbon-based securities. Offsets are different from government-issued permits or allowances. They are assertions by private parties, often in foreign lands, that they will sequester or avoid emitting a quantity of carbon dioxide that otherwise would wind up in the atmosphere. Such claims are conjectural at best and potentially fraudulent at worst. They played no part whatsoever in the successful cap-and-trade system for sulfur dioxide, and are just as unnecessary for carbon dioxide. Indeed, they would seriously weaken a carbon cap by allowing polluters to continue polluting despite the cap - just pay someone, somewhere, not to cut down trees, and you can burn carbon as in the good old days. For that reason offsets are avidly sought by polluters, who want to buy them, and by Wall Street firms, who see a large market for selling them. Kerry-Lieberman-Graham would create a copious supply of offsets (up to 2 billion tons a year), along with complex rules for regulating them.
By contrast, Cantwell and Collins would establish a simple, transparent cap-and-dividend system that returns higher carbon prices directly to consumers and allows only minimal carbon trading. It would cap fossil fuel suppliers like Exxon-Mobil and Peabody Coal, rather than emitters like utilities and steel plants, because it's much easier to catch carbon when it enters our economy than when it leaves. It would auction all carbon permits and avoid giveaways, market distortions and offsets. And it would put a 'collar' on the price of carbon permits in order to limit market volatility.
Revenue from Cantwell and Collins' auctions would be split two ways: 75% would be returned to the American people to compensate for higher energy prices, and 25% would be used for transition assistance and public investments, subject to annual appropriations.
Merits
The arguments for and against each framework can be divided into two categories: merits and politics.
On the merits, the nod goes to Cantwell-Collins by a comfortable margin. Its foremost advantage is simplicity: it's less than 50 pages long (compared to about 1,500 for Kerry-Lieberman-Graham), it's much easier than Kerry-Lieberman-Graham to understand, and would be far simpler to administer. For example, it requires no monitoring of smokestacks or verification of offsets in distant lands.
Another virtue of Cantwell-Collins is its transparency. Its permit auctions are competitive and open, and the public can readily see where all the revenue goes: 75% to everyone equally and 25% to climate-related programs. Moreover, because offsets are not allowed, financial shell games are virtually impossible. By contrast, it's virtually impossible to tell where the money will go under Kerry-Lieberman-Graham, and financial shell games are as certain as oversized Wall Street bonuses.
A third advantage of Cantwell-Collins is its dividends. These guarantee that middle class families won't be screwed. Indeed, a majority of households in all states will come out ahead because their dividends will exceed their higher carbon costs. This will sustain consumer spending and spur our ailing economy. It will also retain popular support for a declining cap as carbon prices rise over time.
Kerry-Lieberman-Graham does promise to return some money to consumers through savings on utility bills, but such returns will vary widely from utility to utility and will be largely unnoticed by ratepayers. Moreover, the returns won't cover higher prices at the gas pump or the indirect costs of carbon in food and other products. And, since the returns will come in the form of lower energy bills, they'll defeat the whole point of putting a price on carbon - to spur energy users to conserve.
Politics
Merits notwithstanding, getting 60 votes is what counts in Washington these days, and Kerry-Lieberman-Graham backers are quick to dismiss Cantwell-Collins as a political non-starter. I'm not so sure.
There are 40+ solid votes for carbon capping in almost any form; the remaining votes needed for passage must come from about a dozen centrist Democrats (most of whom represent coal-dependent states) and half a dozen moderate Republicans. Kerry, Lieberman and Graham seek to win these votes by adding to the Waxman-Markey giveaways further incentives for nuclear power, offshore oil drilling and so-called clean coal. That certainly is one way to go, but not the only way. It also risks losing environmental support if it goes too far.
Cantwell and Collins' appeal to moderates is based first of all on their bill's merits. Believe it or not, there are Senators on both sides of the aisle who prefer policies that can be explained to constituents in a few sentences to Rube Goldberg schemes that can't be explained at all. There also are Senators who would rather not help Wall Street concoct another financial bubble.
Then there are the dividends. Conservatives have derided cap-and-trade as a middle class tax hike - which, effectively, it is. But dividends flip that around - they turn an erstwhile tax into a recurring and highly visible benefit to average families that is potentially as popular as Social Security. With elections coming in 2010, that's not a bad political move.
The strongest political argument against Cantwell-Collins is that it favors coastal states, which generate more of their electricity from hydro, nuclear and natural gas, over Midwestern states, which rely more on coal. Those disparities exist, but are much smaller than alleged: a majority of families in every state come out ahead under Cantwell-Collins. In addition, regional disparities can be tempered with money from the 25% public investment pot.
The wild card in all this is President Obama. Up till now, he's been supportive of Waxman-Markey and its offshoot because that has been the only game in town. But now that there's a bipartisan alternative, a post-Copenhagen Obama could play a different role. Cantwell-Collins is essentially the policy Obama campaigned on - it auctions 100% of pollution permits and protects middle class families by returning higher carbon prices directly to them. If health care reform passes and Obama gets his mojo back, he just might push climate policy in the right direction.
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Article about CLEAR by Mike Sandler on Huffington Post
The Cantwell-Collins CLEAR Act Helps Consumers, the Climate, and the Economy
On Friday, Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) released the Carbon Limits and Energy for American Renewal (CLEAR) Act that auctions permits to fuel producers and returns 75% of the resulting revenue in checks to every American. With its "cap and dividend" approach, this bill would help the U.S. make a fair, affordable transition to a clean-energy, low-carbon economy, and avoid the pitfalls of other climate bills that pander to the coal-burning utilities and Wall Street traders.
Here's how the Cantwell-Collins bill works. The Department of Energy would sell "carbon shares" (see my note below about terminology) to the upstream companies that import and produce oil, gas and coal fuels into the US economy. The annual number of permits issued by the government would decrease by 83 percent by 2050, and would have a price between a minimum of $7/ton and a maximum of $21/ton of CO2e in 2012, increasing each year. This "price collar" prevents the volatility that beset the European Emissions Trading System in its early years, and provides some measure of price certainty for companies to plan their investments in clean energy technologies.
Auctioning 100 percent of permits is great, but even better is the consumer dividend to maintain widespread support for the program, and help households as the new price signal is passed down to them in their fuel and electricity purchases. The bill returns 75 percent of net auctions proceeds directly to every legal resident of the U.S. on a monthly basis through the Federal government's Electronic Funds Transfer system. The other 25 percent of auction proceeds will be used to fund investment into clean energy development, regionally-specific assistance for communities and workers transitioning to a clean energy economy, energy efficiency programs, assistance to low-income families, and other reductions in non-CO2 greenhouse gases.
Cantwell-Collins (CLEAR) versus Waxman-Markey (ACES)
How does the 39-page CLEAR Act compare to the 1,428 page bill that squeaked out of the House on June 26, referred to as Waxman-Markey, the American Clean Energy and Security Act of 2009 (ACES), or H.R. 2454?
The two bills differ in many ways, but here are some of the big ones:
Auctioning 100 percent (CLEAR) versus mostly free allowances (ACES)
Upstream regulation (CLEAR: the well heads, mines and importers of fossil fuels) versus mid-stream regulation (ACES: the power stations and energy intensive industries)
Offsets policy (in CLEAR, offset projects cannot be used as a substitute for reductions under the cap, while ACES includes billions offsets, an amount that could swamp near-term reductions)
Limitations on derivatives trading (CLEAR prohibits such trading, ACES doesn't)
ACES earned its reputation as a complicated cap-and-trade bill by scattering free allowances to dozens of causes, including electric utilities (local distribution companies), "clean coal," adaptation, and deficit reduction. Although some of the causes are worthy, others are questionable. ACES, as well as its Senate counterpart known as Boxer-Kerry, Clean Energy Jobs and American Power Act (CEJ), or S.1733, rely on LDCs to shield consumers, rather than returning the money directly back to people. To give the CEJ a boost, Senators Kerry, Graham, and Lieberman have been working on a framework that adds concessions such as offshore drilling and nuclear power. Kudos to Graham for at least coming to the table, but at some point their effort will stop being about saving the climate, and become just another subsidy to the fossil fuel industry.
By contrast, CLEAR's mantra is "simplicity, transparency and equity." It sends a much clearer price signal to regulated businesses, is revenue-neutral to the government, and provides economic stimulus through dividends to households.
Some groups have already invested a lot into ACES, but for those who think the ACES train has already left the station, check out this quote from AARP, which has entered the climate debate on behalf of its elderly membership living on a fixed income:
"On behalf of AARP and its 40 million members, we thank Senators Cantwell and Collins for their continued leadership on environmental and consumer issues and commend you for introducing the CLEAR Act. AARP believes that reducing harmful carbon dioxide is an important national goal, but it should not be achieved by imposing significant new burdens on American households. The CLEAR Act offers a simple, straightforward approach for reducing carbon emissions in a manner that will mitigate energy cost increases and minimize administrative costs for consumers." - Dean Sagar, Director, Livable Communities, Government Relations and Advocacy, AARP
One quick note on terminology: The CLEAR Act's definition of "carbon shares" is the right to place 1 ton of CO2 emissions into the atmosphere. It's basically a permit. Previously, the term "Carbon Share" has referred to a per capita portion of the overall emissions cap, denominated in tons CO2, and allocated directly to people. For example, individuals would receive a share representing 14 tons CO2 in the mail or electronically on a debit card. People would sell their "share" to the regulated upstream companies. In this way, the sale of shares accomplishes the same goal as dividends: compensating consumers. Consumers could choose to receive either dividends or shares through a check box on their tax form. At this point, the CLEAR Act does not contain such a provision, but it does provide a great starting point for further discussion, and it represents an exciting next step forward in the Senate's climate debate.
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Bill McKibben of the 350 campaign calls for Cap & Share approach
Bill McKibben is a scholar in residence at Middlebury College. His The End of Nature, published in 1989, is regarded as the first book for a general audience on global warming. He is a founder of 350.org, a campaign to spread the goal of reducing atmospheric carbon dioxide to 350 parts per million worldwide. This article was written for the Environmental site e360 run by Yale University.
President Obama’s Big Climate Challenge
As he assumes the presidency, Barack Obama must make climate-change legislation and investment in green energy top priorities. And he must be ready to take bold — and politically unpopular — action to address global warming.
And so our eight-year interlude from reality draws to a close, and the job of cleaning up begins. The trouble is, we’re not just cleaning up after a failed presidency. We’re cleaning up after a two-century binge.
Barack Obama has won an historic victory, and with it the right to take office under the most difficult circumstances since Franklin D. Roosevelt. Maybe more difficult, because while both FDR and Obama had financial meltdowns to deal with, Obama also faces the meltdown meltdown — the rapid disintegration of the planet's climate system that threatens to challenge the very foundations of our civilization.
Do you think that sounds melodramatic? Let me give it to you from the abstract of a scientific paper written earlier this year by one of the people who now work for Mr. Obama, NASA scientist James Hansen. "If humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted, paleo-climate evidence and ongoing climate change suggest that CO2 [in the atmosphere] will need to be reduced from its current 385 ppm [parts per million] to at most 350 ppm." In other words, if we keep increasing carbon any longer, the earth itself will make our efforts moot.
Hansen's calculation is a scientifically grounded way of saying: Everything must change at once. To meet his target, before enough feedback loops kick in to irrevocably warm the planet, Hansen says fossil-fuel combustion, particularly coal, must cease around the planet by about 2030, and that it must happen sooner in the industrialized nations. As the climate observer, and tireless blogger, Joe Romm observed when Hansen's paper was published, it means that "we need to go straight to the government-led WWII-style effort for the whole planet that is sustained for decades." (Well, back to FDR, what do you know).
Anyway, here are some of the pieces of what Obama must push for:
Massive government investment in green energy. For this to have any hope of being politically viable, it will need to be seen as the single huge stimulus effort that might lift us out of our financial swamp. (That's almost certainly true, by the way — name another emergent technology capable of re-floating the economy for the long run). We have at least some of the technologies we'd need — wind, the newly promising desert solar arrays, and the ever-useful insulation (the installation of which would at least create a lot of jobs — you're not going to send your house to China for a layer of fiberglass). You might also push for nuclear, but it takes a long time and it's probably too expensive to make a rational list. Still, no holds barred.
A stiff cap on carbon, which will help drive the process. Again, to have any chance of passing politically, it will need to come with the feature proposed in recent years by Peter Barnes, and that Obama has semi-endorsed: a "cap and share" approach that would return the revenue raised directly to consumers. That is, Exxon would pay for the permit to pour carbon into the atmosphere, a cost that would rise steadily as the cap was lowered. But instead of the money going into government coffers, every American would get a check each year for their share of the proceeds. They'd be made whole against the rising cost of energy, while the shock that the price signal would send would be preserved. Current versions of cap-and-trade are too weak and too riddled with loopholes — getting a clean, tough bill through Congress needs to be a preoccupation of President Obama.
Once the president has done all that tough stuff at home, he'll need to do it all over again, globally. The world is meeting in Copenhagen in December of 2009 to come up with a successor to the Kyoto treaty, the modest first international effort that George W. Bush walked away from weeks after taking office. If Hansen and others are even close to right, this will represent the last legitimate shot the world has at putting itself on a new carbon regime in time to make any difference.
It will be incredibly difficult, mostly because we begin from such unequal places. China has lots of coal and it would like to burn it, because it's the cheapest way to pull rural Chinese out of dire poverty (something the country's leaders would quite like to do because otherwise they won't be the country's leaders much longer). If we want them to use, say, windmills instead, we're going to need to “share some wealth,” north to south, to make it happen. The Chinese opened the bidding last week, with a suggestion that one percent of the U.S. annual GDP would be a good amount to send their way. That's going to be quite a political ask — it means that Americans would be working roughly one hour every two weeks just to help the global South build up their clean alternatives. What we're talking about is a carbon version of the Marshall Plan, and it would mean Obama needs to be not just FDR but Truman and Ike as well.
What it all boils down to is: The bills are coming due. And not just, or even mainly, the bills from a failed Bush presidency, but the bills from 200 years of burning fossil fuel. Twenty years ago when we started worrying about global warming, we thought we'd have a generation to pay those bills off. But we were wrong — the planet was more finely balanced than we'd realized. The melting Arctic is the call from the repo man.
Any hope of succeeding will require Obama to grasp, deep in his guts, the fact that climate, energy, food, and the economy are now hopelessly intertwined, and that trying to solve any one of these problems without taking on the others simply makes all of them worse. More, he needs to understand, again viscerally, the single stark fact of our time: No matter how many votes, no matter how much lobbying, no matter how much pressure you apply, you can't amend the laws of physics and chemistry. They aren't like the laws that politicians are used to dealing with. They will be obeyed, like it or not. 350 is now the most important number on the planet, the red line that defines reality reality.
It doesn't define political reality, however. The political reality goes like this: George W. Bush was so terrible on this issue that the bar has been set incredibly low — Obama will get all the political points he needs with fairly minimal effort. Doing what actually needs to be done will be politically…unpopular isn't even the word. It might well wreck his political future, because it would involve — directly or indirectly — raising the cost of continuing to live as we do right now.
My guess, from the outside, is that all Obama's instincts are centrist. Certainly in energy policy he's offered nothing all that bold or interesting, though his sophistication and engagement have grown during the campaign, which is a good sign. A better sign is simply that, by every testimony, he's one of the smartest men ever to assume high political office in this country. Not just smarter than Bush. Really smart. Smart enough, if he sits down to really understand the scale of the problem he faces, that he might decide to take the gambles that the situation requires. He said, not long ago, "under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket" — which is a sign of someone who is aware there may be a reality to come to grips with.
First signs to watch for: Does he go to Poland next month for the United Nations Climate Change Conference, and in so doing electrify the international talks over carbon? Are people like green-jobs advocate Van Jones on the short list of those he's listening to on energy policy? Can he see clear to making this — after dealing with the short-term financial emergency — his first legislative priority, even before health care?
Obama, and the rest of us, have a lot more to fear than fear itself. We've got carbon, and right now that's the most frightening stuff on earth.